When buying a business, there are a number of contract considerations that should be taken into account to ensure that the transaction is legally sound and protects the interests of both the buyer and the seller. Here are some of the key contract considerations when buying a business:
- Purchase Agreement: The purchase agreement is the primary contract that outlines the terms and conditions of the sale, including the purchase price, payment terms, and any contingencies or conditions of the sale. It is important to have this agreement drafted by an experienced business attorney.
- Due Diligence: As a buyer, you will want to conduct due diligence on the business to verify its financial and operational performance. The purchase agreement should include provisions that allow you to conduct due diligence and provide a timeframe for completing the process.
- Non-Disclosure Agreement (NDA): Before entering into discussions about the sale of a business, the buyer should sign an NDA to protect the seller’s confidential information. The NDA should outline the terms of the confidentiality agreement and the penalties for violating it.
- Employment Contracts: If the seller’s employees will be joining the buyer’s business, the buyer will need to consider employment contracts and any employee benefits that may need to be negotiated or transferred.
- Intellectual Property (IP) Ownership: The buyer should verify the ownership of any intellectual property (IP) associated with the business, including trademarks, patents, and copyrights. The purchase agreement should include provisions to transfer ownership of the IP to the buyer.
- Lease Agreements: If the business operates from leased premises, the buyer will need to review the lease agreements and ensure that they can be transferred to the buyer.
- Non-Compete Agreement: The seller may be required to sign a non-compete agreement to prevent them from competing with the buyer’s business for a specified period of time after the sale.
- Tax Considerations: The buyer should consider the tax implications of the purchase, including potential tax liabilities associated with the sale and any tax benefits or deductions that may be available.
- Dispute Resolution: The purchase agreement should include provisions for dispute resolution, such as mediation or arbitration, and a legal fees provision so that you can recover your legal fees in the event you have to sue the seller for a breach of contract.
