The purchase and sale of a business involves complex legal and tax issues, many of which require the assistance of lawyer. Owners of business sometimes lack professional knowledge regarding legal issues and such business transactions may not be readily apparent to the parties involved.

Without the help of these experts, business owners might put themselves in unintended and painful legal/tax consequences.

A few of the major considerations arising from purchase and sale that often require legal and/or tax advice include:

1. Non-Competition Agreements
2. Tax Issues (e.g., income tax consequences and applicability of sales taxes)
3. Choosing between an Asset and a Share sale
4. Employment/Contractor Agreements for the exiting Owner
5. Assuring Confidentiality throughout the Transaction
6. Determining the most suitable Ownership Structure for the Purchaser (e.g., corporation, individual, partnership, trust, etc.)
7. Representations and Warranties made by the Buyer and the Seller
8. Payment of the Purchase Price (e.g., will the Seller be providing vendor financing)

The eight cases listed above seem complicated enough, however they are only a fraction of the issues to be considered in buying or selling a business.

Other situations to consider may include: whether special licenses, permits or regulatory approvals are required, whether legal restrictions exist on some professional businesses, and how to deal with outstanding liabilities of the business being purchased/sold.

Depending on the type of the business, both the seller and the buyer may also want to ensure whether they are protected on employment, environmental and intellectual property matters.

The intent of this writing is to provide readers with general information about certain aspects of the law relating to business transaction. It is not a definitive analysis of the law, nor is it a substitute for legal advice.

For more information, please contact us.