I was bitten by the entrepreneurial bug from a young age. From running lemonade stands, to calling leasing agents and trying to open an arcade at the age of 12, I eventually worked my way up to owing a number of small businesses. Some were success stories…some not so…but I am always excited to hear of someone striking out into business for themselves. A great way to begin your journey is with a business broker who will be able to assist you in identifying a business suited to your unique goals, skills, interests, financing needs and so on. It can be a long search, but with so many opportunities out there, it should be very interesting and a great learning experience. Once you have located a target business, either on your own or through a broker, a lawyer is able to step in and assist.
There are a number of things to consider from the very beginning, one of which is whether you will be purchasing the shares of the business (assuming it is a corporation) or only the assets (equipment, name, goodwill, inventory etc.). Generally, a share purchase is less expensive as it is a simpler process where you essentially step into the shoes of the previous owner. However, when you take over the operating company, you will also be subject to any past liabilities that may lurk in the shadows. For example, if the company failed to complete a contract a year ago, that client may still bring an action against the business. This may leave you, as the new owner, to bear the consequences of liability that you personally had no involvement in.
The alternative to a share sale is to purchase the assets of the business. This can still be a seamless transition to the customers of the business; however the inventory, equipment, trademarks, goodwill and other assets will be sold to a new business entity (i.e. a corporation, partnership, or sole proprietorship). Further, any related leases, supplier contracts, employment agreements and other contracts would have to be assumed by your business entity. As you can imagine, this will result in a number of additional steps both in the sale and due diligence process, but provides some separation from the history of the business and when you begin as owner.
I will discuss some of the additional steps and considerations in coming posts, including “to incorporate, or not to incorporate…that is the question”. Further topics may also include, “can someone be sued for plagiarizing Shakespeare in a desperate attempt to make legal questions sound more dramatic?” Stay tuned, or in the meantime, feel free to contact me directly with any questions you may have.