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Essential Legal Documents for Buying a Business

Essential Legal Documents for Buying a Business picIf you are considering purchasing an existing business, it is important to conduct proper due diligence to ensure that you fully understand what you are getting yourself into. Most business purchases are either asset purchases or entity purchases. Once you have determined that you want to proceed with the purchase, you will need to work with a knowledgeable business attorney to properly document the transaction and protect your best interests.

Below are the primary legal documents that are typically included in the purchase of a business:

  • Purchase Agreement
  • Promissory Note
  • Security Agreement
  • Bill of Sale
  • UCC-1 Financing Statement
  • Deed
  • Personal Guaranty
  • Escrow Agreement
  • Non-compete Agreement
  • Consulting or Employment Agreement
  • Consent of Landlord to Assignment of Lease
  • Assignment of Lease

If you are purchasing only the assets of the existing business, the primary document that will govern the transaction is the Asset Purchase Agreement. If you are buying the entity the governing document is commonly referred to as the Purchase Agreement. Whatever it is called, this governing document outlines the numerous terms and conditions of the sale.

The purchase agreement often attaches all of the ancillary documents as exhibits to it. This allows the parties to agree to the form and content of the subordinate documents when they sign the purchase agreement, which significantly reduces the likelihood of further disputes regarding the transaction and helps ensure the transaction will close in a timely manner.

No two transactions are identical, so the above list is not exhaustive. There are numerous other documents that may be required to complete your purchase and some of the above may not be necessary. For example, it is wise to confer with a tax professional regarding what documentation should be included to ensure the taxes are properly handled.

The following two blogs will discuss each of the documents listed above in more detail. However, if you are interested in buying or selling a business, call us today to schedule an initial consultation. Obtaining the right advice from the start can significantly increase the likelihood of your business being a success. Contact The Swenson Law Firm for help.

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