Buying a Business? Consider Getting an Attorney’s Help

It’s part of the DNA of any business: a desire to expand and take on new challenges. One time-honored way for a business to do that is to simply acquire another business. Or, rather, it may seem simple – but as with many transactions in the business world, there are complexities beneath the surface, and a smart business owner will not tread those waters alone.

Know the Different Types of Business Purchases

When structuring the sale and purchase of a business, there are two options: an asset purchase or a stock purchase. Both have advantages and disadvantages, and to make the right choice, you need to understand the implications of each type, including what is actually included in the sale under each structure and the tax implications of both.

In an asset purchase, the buyer agrees to purchase certain assets from the seller, including things such as fixtures, equipment, licenses, trade secrets, and accounts payable and receivable. This structure guarantees that the buyer will be responsible only for the liabilities attached to the specific assets he purchases.

Certain tax advantages make asset purchases attractive for many buyers. Also, in an asset purchase, the buyer can pick and choose what sort of liabilities he wants to take on – if the target company has unattractive liabilities, the buyer can simply “carve out” the particular assets they’re attached to. However, this type of sale can prove to be much more complicated than a stock purchase, mostly due to the need to do due diligence for each individual asset.

In a stock purchase, the buyer purchases the entire company. This would include all assets as well as all liabilities. One of the biggest advantages of a stock purchase is its relative simplicity, compared to the intricacies of an asset purchase. However, the downsides are predictable – while in an asset purchase the buyer can cherry-pick which liabilities to take on, if any, in a stock purchase the buyer becomes responsible for the entire package, liabilities and all.

This is where many successful entrepreneurs will seek the help of a business attorney. There are a lot of variables involved in determining the optimal kind of purchase to make, and – especially for Maryland business owners – it is crucial to seek the advice of a lawyer well-versed in the state’s laws dealing with acquisitions.

Get On Top of Your Documentation

Once you’ve determined what kind of purchase is best for all parties, your next step is to get your documentation in order. The qualified business attorneys at Lusk Law, LLC, can help with gathering, reviewing, and drafting key documents, including contracts, leases, and corporate documents. Of special importance is the letter of intent and purchase agreements, which detail the specific agreements between the parties, during the due diligence and upon the actual purchase.

If your business is seeking to expand by acquiring another company, now is the time to contact our attorneys for a consultation to learn how they can help maximize your profits while reducing your liabilities.

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