After you have decided on buying a business, completing the acquisition involves a series of actions. The closing is the final step in the process of buying a business. Keep in mind that you should have counsel available to review all documentation necessary for the transfer of the business.
The following items should be addressed in a closing:
- Adjusted Purchase Price This will include prorated items such as rent, utilities, and inventory up to the time of closing.
- Review Required Documents These documents should include a corporate resolution approving the sale, evidence that the corporation is in good standing, or any tax releases that may have been promised by the seller. Check with your local department of corporations or Secretary of State for more information.
- Signing Promissory Note In some cases, the seller will have back financing, so have an attorney review any note documentation.
- Security Agreements A security agreement lists the assets that will be used for security as a promise for payment of the loan.
- UCC Financing Statements Uniform Commercial Code documents are recorded with the Secretary of State in the state you will be purchasing your business.
- Lease: If you agree to take over the lease, make sure that you have the landlord’s concurrence. If you are negotiating a new lease with the landlord instead of assuming the existing lease, make sure both parties are in agreement of the terms of the new lease.
- Vehicles: If the purchase of the business includes vehicles, you may have to complete transfer documents for the vehicles. Check with your local Department of Motor Vehicles to determine the correct procedure and necessary forms.
- Bill of Sale: The bill of sale proves the sale of the business. It also explicitly transfers ownership of tangible business assets not specifically transferred on their own.
- Patents, Trademarks and Copyrights: If there are any patents, trademarks and/or copyrights associated with the business, you may need to complete the necessary forms as part of the transaction.
- Franchise: You may need to complete franchise documents if the business is a franchise. See the Consumer Guide to Buying a Franchise for more information.
Closing or Settlement Sheet The closing or settlement sheet will list all financial aspects of the transaction. Everything listed on the settlement should have been negotiated prior to the closing.
- Covenant Not to Compete It is a good idea to have the seller sign an agreement to not compete against the business. This will help prevent any interference from the previous owner.
- Consultation/Employment Agreement: If the seller is agreeing to remain on for a specified amount of time, this documentation is necessary for legal purposes.
- Complete IRS Form 8594 Asset Acquisition Statement This document will indicate how the purchase was allocated and the amount of assets, which are important for your tax return.
- Bulk Sale Laws: Make sure that you comply with bulk sale laws, which govern the sale of business inventory.
Need help with transacting the purchase of a business? Cervitude™ Intelligent Relations Consulting can help, contact us today.