When representing the Seller of a business, we focus on issues that will protect our client. Here are some of them:
- Making sure we get to contract quickly and get to closing quickly. We don’t want “lawyering time” to kill a deal. Both buyers and seller are always excited by the proposed transaction. As Seller’s attorneys we want to make sure we can prepare a contract quickly. This requires knowledge of key business information necessary for preparation of a contract:
- Thorough understanding of business ownership and entity information
- Accurate information as to lien creditors (UCC Security Interests, Mortgages, judgment liens
- Pending lawsuits
- Assets
- Trade creditors
- Utilities
- Tax liabilities
- If the business is a tenant under a lease, you want to make sure the lease is assignable; that the landlord will be comfortable with the new tenant and will consent to the assignment of the lease; that the lease is for a long-enough period so the prospective buyer will be interested in purchasing; and most importantly, that the prospective buyer does not go behind your client’s back to make a direct lease with the landlord and then back-out of your proposed deal. If the seller is personally liable to the landlord under the lease, it is important the the buyer takes over that liability and the landlord removes the seller’s guaranty.
- The income tax treatment of the transaction is also important. The seller will want to minimize “ordinary income” and maximize “capital gains” which are taxed at a lower rate. Accordingly, the contract should provide for allocation of the purchase price in a way that is beneficial to the seller.
- Dealing with Secured Creditors:
- Certain secured creditors (such as Lenders and Merchant Capital providers) will have to be paid at the closing.
- Other creditors, such as equipment lenders or vehicle loans may have to be taken over by the buyer because the collateral is central to the ongoing business.
- Tax debt for payroll or sales taxes will have to be cleared with involvement of those creditors prior to closing.
- Dealing with trade creditors
- It may be critical to the buyer that relationships continue with providers of key services or products
- on the other hand, the buyer may have its own sources of these services or products. These issues must be sorted out as the contract is prepared.
If you are considering selling your business, let us partner with you in making the deal. https://www.silawfirm.com/business-transactions/
Corash & Hollender, P.C.
Staten Island’s Business Lawyers
Counseling family business owners since 1977
We listen….We care…We help
1200 South Avenue, Suite 201, Staten Island, NY 10314
718-442-4424
[email protected]