Several people ask me how important it is to have proper legal documents when buying a business - there's nothing scary about getting into trouble with the Internal Revenue Service, just prepare your tax returns right.
Well, when you buy a business, a lot of things happen that business must get a D&B Sale Certificate (D&B) - this certificate is required if you are the business's owner. The Fzz Following post gives very good information:
Now, when buying a business or investing in a company, be sure you do proper due diligence before you sign anything. Many times, despite the good advice from Accountants, you will be required to sign a binding contract with all sorts of clauses (which will of course lead to clauses, and stipulations, that conflict with what you want to happen with the company). Also, as a buyer you might have specific requirements regarding the price of the company. For example, certain rules protecting the purchaser (in which this could be a partnership, LLC, or the business in general) might preclude the sale of the business (any company or entity) for a value higher than the purchase price.
As a buyer, due diligence is not realistic for most deals because most businesses cannot sell off the inside. In some cases, for reasons other than strictly financial ones; the seller may agree to sell a business, in advance and even pay cash to buy the company.
If that is the case, then finance is not an issue - the buyer could sign the binding contract and get it financed. And due diligence is no problem if all parties receive the documents the new owner provides them within 15 days.
The only problem that can arise in that situation is having legal counsel, the contract that will contain clauses that contradict a seller's ideas and vice versa. More and more clauses, rules, and stipulations are becoming boilerplate in the marketplace - there is no reason not to protect a buyer or investor.
In all my years working with real estate and doing business consulting, 90% of my contracts have been challenged due diligence schedules. More times than not, I have had opposing opinions. This is truly a mutual field; there is nothing worse than having the buyer and seller present at a letter by a lawyer and then having that attorney contest the document.
That is why many people want to buy a business, but when they get going: 1) the role changes to a buyer (and sometimes if they are skilled, a writer), and 2) the buyer's role changes from being a key figure in the business, to a consultant and owner.
If you or your company hasIrrelevant CAN-DVD Canada Devenient Truth film and/or a Co-Producer (s) with experience that will guide you regarding proper due diligence. I think in most cases you should give that a try.
Unfortunately, before the appropriate due diligence can happen, a franchise buyer is going to have a negotiating team on his or her side. These team members want to do business with you... they are aware of, and they are able to see, potential pitfalls that the prospective buyers never see.
We do a lot of work with franchisors and related sources. The potential buyer will also have a team of people and resources associated with buying the franchisor. I try to illustrate to the prospective buyers what you (the franchisor) must do for your team members to protect yourself. It's called a "due diligence document".
If that does not occur, then you have issues. And more to the point, you and the prospective franchise buyers will be wasting their time creating you a D&B Sale Certificate (D&B) if the D&B Sale Certificate is not guaranteed to protect the new owner.
If you are a bit scared of doing due diligence but you understand that it's an important part, then just be aware:
DO YOUR RESEARCH!
You can work with the franchisor
If you are a prospective buyer of a historically owned business this is a thing that is in the contract and in the designated clauses of the legal document.
If you think these steps will not work, and if you don't have adequate time, you have third party assistance who prepare it for you - so, there is no need to do it (even if you have two or three people who do this marketing for you - they are not qualified to do it).
Again, due diligence is not realistic for most deals, but when it does occur, you have a better chance than if you just rely on your gut and hope for the best.
And in all honesty, you might argue making a deal with your team members, will the FTC stop this idea if it is potentially harming them, but in reality you shouldn't have to do it because something can go sour.
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