Legal Question in Business Law in New York

buying small shop from owner who wants quick sale

Looking to buy a small floral shop that is a division of the owner's primary company. He bought it a year ago for his mother-in-law who no longer can work it. I saw the shop, but no records. He said he can show me what he will be filing for taxes, but won't be filing until August.

He's asking for $1,500 down-payment to take if off the market. I'm waiting to hear back from an attorney. Don't know if this is normal? Will I get this money back if during due diligence things don't look good? Can this be spelled out in a letter of intent? Can the money be held in escrow until closing or cancellation of the deal?

The asking price is $17k with 1/2 at closing and 1/2 over 24 months at 0%. I was going to make a cash offer for around $10k. Should I check with the owner first to see if he'd be willing to take that amount before paying an attorey to draft the letter of intent?

During due dilligence, what parts does the attorney do? Does s/he find out if there are pending lawsuits, taxes all paid up, the guy selling it is authorized to sell it, the lease is assumable, zoning issues (while seeing the shop the town building inspector came in and gave him orders to appear in court for signage that he didn't get permist for), etc?


Asked on 3/10/04, 10:48 am

3 Answers from Attorneys
David Slater David P. Slater, Esq.

Re: buying small shop from owner who wants quick sale

Your matter is too complicated to answer here. Retain an attorney.

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Answered on 3/10/04, 11:28 am
richard feldman richard d. feldman

Re: buying small shop from owner who wants quick sale

just reviewing the many questions that you ask and the consequences that arise therefrom indicates that you should have an attorney as soon as possible

you can call my office at 212683 8677 for free consultation

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Answered on 3/10/04, 11:45 am
William Frenkel Frenkel Sukhman LLP

Re: buying small shop from owner who wants quick sale

1. You certainly do not want to make any downpayments without some sort of a preliminary agreement, if not the actual purchase contract.

2. The first thing you need to find out about this business is what form it's in -- corporation, LLC, partnership, sole proprietorship -- how it relates to the seller's company (subsidiary, affiliate, division) and who owns or leases the key assets (lease, inventory, machinery, etc.). This is because you have an important choice to make: whether to buy stock, shares or member/partner interests of the company or whether to buy its assets. This is critical for your tax planning and also liability protection from third party claims.

3. You may need both an attorney and an accountant to handle due diligence. Although the amount of the purchase price is relatively low and you cannot run up big bills in connection with the purchase, your liability risks in buying this business blind may be considerably higher than the purchase price. When the seller offers no financial records whatsoever and does not cooperate with you in due diligence, it sounds like trouble.

Please note that this is for general information only and not legal advice to be relied on in making any decisions. You need an attorney to represent you in the purchase if you plan to pursue this further.

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Answered on 3/10/04, 11:53 am


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