
Buying a small business can be a rewarding way to grow your investment portfolio, expand existing services, or add your personal touch to a company you already love. Before you buy, understanding the legal landscape is crucial. Purchase agreements list the sale price, define liabilities, set out how to transfer assets, assign employee obligations, and determine your long-term rights. Careful legal planning can help avoid unexpected issues and ensure a smooth transition.
At BrewerLong, we provide personal attention and high-quality legal services to business owners throughout Central Florida. Since 2008, our attorneys have helped entrepreneurs, investors, and business professionals manage every stage of business ownership, from formation through sale. We bring deep experience in business planning, contracts, mergers and acquisitions, and trademark law. Our team collaborates with clients to craft agreements that protect their interests and minimize future risks.
Steps to Buying a Small Business
If you are considering buying a small business, the process may vary depending on where you are, what the business is, who is involved, and why they are selling. In a broad sense, the business purchase process involves:
- Evaluating the business’s existing performance and growth opportunities,
- Conducting a detailed investigation into the business,
- Negotiating the purchase agreement,
- Securing financing, and
- Closing the deal.
Each step involves legal considerations that an experienced business attorney can help you understand and guide you through how they apply to your unique situation.
Legal Factors to Consider When Acquiring a Company
Before you buy a business, you need to know the ins and outs of what you are getting into. Completing a thorough investigation is essential to make informed choices and negotiate sale terms that account for many possibilities. A well-drafted purchase agreement does more than transfer assets—it protects you from liabilities, clarifies your rights, and outlines expectations for both parties. Understanding and anticipating the potential influence of the following factors when acquiring a company can help you avoid surprises and position your new venture for long-term success.
Purchase Structure: Asset vs. Stock
You may structure a business sale so that buyers may:
- Purchase assets only, such as inventory, equipment, customer lists, and goodwill;
- Purchase ownership interests, such as the stock or membership units of the business entity; or
- Use a hybrid structure, such as a combination of asset and stock components, to meet specific tax and liability goals.
How you structure the sale can have significant implications. Asset purchases typically allow you to receive the property free and clear of debts or liabilities. Stock purchases transfer the business as a whole, including its liabilities. An experienced business attorney can advise you about the pros and cons of each to help you decide which structure is best for your unique circumstances.
Intellectual Property
Intellectual property is an essential part of modern businesses. A business may own or use:
- Registered trademarks;
- Trade names or business names;
- Domain names, copyrights, and proprietary content; and
- Trade secrets, processes, or product designs.
If the purchase agreement does not address intellectual property, you could lose the right to use the business name, logo, or website.
Goodwill
Goodwill is an intangible asset that reflects customer loyalty, brand reputation, and business relationships. While difficult to quantify, it can significantly impact a business’s value, so you should address it directly in your purchase agreement. An experienced attorney can help you manage and transfer goodwill to ensure the company retains the value that attracts loyal customers.
Valuation and Price Adjustments
One of the most complicated parts of purchasing a business is determining how much the company is worth. Even experts can disagree on the fair market value of a business, making experienced guidance essential. Your lawyer can help negotiate formulas to determine value and include systems to verify that those formulas accurately reflect the business’s on-the-ground reality.
Existing Contracts, Leases, and Vendor Agreements
A business’s ongoing success may depend on existing contracts, which may include terms related to ownership transfers that you must follow. Review:
- Commercial leases;
- Customer and vendor agreements; and
- Equipment leases, financing agreements, or service contracts, such as IT support, cleaning services, or subscription-based software.
A business lawyer can help you structure the sale to address how the newly acquired company will handle these contracts, honoring the promises already made while forging something new.
Employees and Human Resources
When acquiring a business with employees, ensure you understand where the company stands concerning:
- Compliance with wage and hour laws;
- Employee agreements, benefits, or termination clauses; and
- Liability for unpaid wages, accrued vacation, or potential employment claims.
Thinking ahead and being deliberate about employees who stick with the company can help you build internal goodwill and avoid unexpected liabilities.
Liabilities and Indemnification
A comprehensive purchase agreement should:
- Allocate responsibility for taxes, lawsuits, or debts;
- Include indemnification clauses, requiring the seller to reimburse the buyer for certain losses post-sale; and
- Require the seller to disclose known risks and pending legal matters.
These protections are critical in stock purchases, where liabilities transfer with the company.
Non-Compete and Confidentiality Agreements
Depending on the specifics, consider incorporating non-compete or confidentiality agreements into the sale. These agreements may forbid the seller from, for example:
- Opening a competing business nearby;
- Contacting former clients or employees; and
- Sharing sensitive or proprietary information, including business strategies, customer lists, or pricing models.
A business lawyer can help you understand whether you need to use such agreements and what to include, enabling you to protect the business and maintain its stability through the ownership transition.
Work with a Florida Business Attorney Who Understands
Buying a small business is a major investment with exciting potential. However, without knowledgeable and experienced legal guidance, it can be complicated. At BrewerLong, we help clients across central Florida make smart, informed decisions when acquiring businesses. Our attorneys draft, negotiate, and review purchase agreements that address real-world risks. Contact BrewerLong today to schedule a consultation.