Selling or purchasing a business is a complex transactional task necessitating significant resources and time and requiring the consideration of various factors, including the transaction's structure, tax consequences, macro, and micro risks, the likelihood of success, the business's operational and financial characteristics, and the legal requirements of the business purchase or sale. With an awareness of these facets, business purchasers can expect a smoother business transition, and business owners can effectively relay the necessary information to convince buyers to proceed with the sale. Learn the main things to consider when buying and selling a business, and explore how a New Orleans business lawyer might aid startups, shareholders, and business owners with their business purchases or sales; call the Business Law Group today at (504) 446-6506.

What Does Buying or Selling a Business Involve?

According to the Small Business Administration (SBA), there are more than 32 million small businesses in the United States, highlighting the possible business purchase and sale opportunities available. Selling or buying a business is a complex transaction, irrespective of its size. Although the exact process depends on the particular company, the purchase and sale process typically involves the following steps.

Obtain a Business Valuation

The first step involves the seller and buyer obtaining independent valuations of the company to help the seller set an appropriate price and prevent the buyer from overpaying. Many buyers and sellers of businesses use a professional appraiser to assist with this process, defined by the Appraisal Institute as an objective third-party capable of providing unbiased opinions regarding real property, who reviews the company's financial performance, competitive landscape, and market conditions to determine the company's true value.

Conduct Initial Negotiations

Next, the business's sellers and purchasers begin the initial negotiations where they discuss the transaction's key terms, including price, sale preconditions, and transaction structure. Each side may bring in an attorney to achieve optimal sale terms and conditions.

Carry Out Due Diligence

The buyer then typically asks their attorney to complete due diligence, a lengthy, important, and complex part of purchasing and selling a business. Here, the aim is to accurately ascertain the company's viability and commercial value by reviewing the business's finances, legal issues, and operations.

Draft Legal Documentation

After completing due diligence, it is then necessary to negotiate the terms of and draft various legal documentation linked to the business's purchase or sale, which an attorney may help to complete. These documents may include letters of intent, bills of sale, purchase agreements that include every business asset part of the sale, indemnification clauses to protect against unforeseen events, and continued employment terms for assisting with the transition, lease assignments, and security agreements. In addition, they might draft non-compete agreements to prevent sellers from opening a competing firm and confidentiality agreements that take effect prior to the completion of due diligence.

Reviewing and Closing the Deal

Finally, the buyer and seller check they have obtained the required approval from each party to close the sale. Then, the purchaser pays the business owner the money agreed upon during the negotiation process, and in exchange, the seller completes the documentation to legally transfer the business to the new owner.

Do I Need an Attorney To Buy or Sell a Business?

Attorneys specializing in business sales and purchases can assist with business appraisals, prepare the necessary sale documentation to ensure it is legally binding and accurate, navigate the buying or selling process, and represent the interests of business owners and purchasers during the negotiation process. They can also help complete the due diligence and prevent future disputes.

Acquire a more comprehensive understanding of the key considerations related to buying and selling a business, and discover how a knowledgeable Louisiana business law attorney can help existing and prospective business owners. Contact the Business Law Group today to arrange a consultation.

What To Consider When Buying and Selling a Business

Purchasing or selling a company is a significant undertaking; as such, both purchasers and sellers may want to have a thorough understanding of the organization's operational and financial characteristics. Here are the key things to consider when buying or selling a business.

Understanding the Organization's Financial Well-Being

A prospective buyer and seller of a business needs a thorough understanding of the company's previous, current, and future financial position. Sellers can benefit from having the ability to discuss the company's many financial metrics and other details, including profit margins and annual and average growth rates; they also require copies of key financial documentation to facilitate a smooth transition. Future business owners may want to understand the company's cash flow situation and other financial metrics to determine whether the purchase is likely to be beneficial for them.

Checking Records

By conducting due diligence, both parties can obtain improved confidence during the transaction. This includes reviewing the business's current and previous financials, operational and legal documents, legal agreements, balance sheets, profit and loss statements, tax filings, and employment contracts. Sellers can aid this process by having a document retention and maintenance system in place to make it easy for both parties to access this information, and future buyers may want to inquire about supplier, distributor, and subcontractor relationships and employee hierarchies and consider their strategic plan in the first few months after the deal completes.

Researching the Market

Prospective and existing business owners require excellent local and national market knowledge linked to where the company operates. They might want to understand how to prevent losses to the organization during an economic downturn, safely expand the company into new markets while mitigating risk, and invest the business's profits when the economy is performing positively. Future buyers and current business owners may wish to research the cost of raw materials, energy price changes, competitors, market conditions, current political and economic environment, technological changes, and trends in terms of equipment, labor, sales, and expenses to gain this understanding.

Reviewing the Business's Operations

Healthy business operations are equally as important as an organization's financial well-being since the firm is unlikely to be profitable if it is operating inefficiently. A buyer may want to understand what influences decision-making concerning the direction the company is taking and review operational records. They might also ask to see current client contracts, product/service descriptions, and details concerning prospects, as well as information on the company's business development strategies, distribution methods, and product or service terms of conditions.

Analyzing the Company's Culture and Internal Dynamics

The seller may want to consider sharing with the purchaser who works at the organization, the compensation and benefits of these individuals, their work attitude, their industry knowledge, and years of service to provide the buyer with insight into the company's work culture and internal dynamics. In particular, prospective business owners may want to understand which employees are valuable and which do not help company growth.

Contact a New Orleans Business Law Attorney Today

Contemplating the different financial and legal considerations of selling and buying a business can help boost the chances of completing a transaction that pleases both the purchaser and seller. If planning a business purchase or sale, consider speaking to an experienced Louisiana business lawyer from the Business Law Group to get assistance throughout the transaction and to discuss the next steps after the deal's completion. Speak to our legal team today by calling (504) 446-6506.