Legal Question in Business Law in California

Re: buyi ng an existing business

When purchasing an existing business, it is highly advisable for you to work with an attorney.

Re: buyi ng an existing business

Are you buying the building (real estate) also, or just the business? Also, if the business is incorporated, are you buying the stock, or the corporation's assets?

If buying any real estate, in addition to any other documents you'll need a notarized deed that can be recorded upon the closing of the deal, making you the owner of record.

If no real estate is involved, the basic document you need is a contract with the sellers. Such a contract should cover, as a minimum:

1. The purchase price, and how and when it is to be paid. If part of the price is to be paid later, the seller or lender will probably require a promissory note and security agreement or their equivalent.

2. A detailed itemization of what is being sold, either stock or a list of assets, and this should cover cash, receivables, inventory, tools and fixtures, trademarks, licenses, and so forth.

3. The contract should cover how the liabilities of the business will be handled, i.e. do the sellers agree to pay all the bills out of the purchase money, of does the new owner assume responsibility for paying some accounts?

4. The contract should discuss the employees. Is there unpaid vacation liability? Are the employees at will or under contract? Is there a union contract?

5. A buyer should consider a non-compete clause.

6. The contract should include the sellers' representations and warranties that the books shown the buyer are accurate, that there are no undisclosed liabilities or threatened lawsuits, that the premises lease can be assigned to the buyer, and so forth.

It may be necessary for the parties to comply with the Bulk Sales Act, Commercial Code sections 6101 to 6109.

As you can see, it is highly advisable to have a business attorney represent you to make sure the transaction is well documented and trouble free.

Re: buyi ng an existing business

Forms? There are none.

A real purchase contract with warranties and terms negotiated between the parties and drafted by experienced legal counsel? You bet.

But, you can save the money needed for attorneys now, and use it as part of what it will cost later to hire counsel to resolve the legal disputes that will inevitably arise when someone decides things aren't as they 'thought' they were supposed to be.