NJ Business Lawyers

Buying or selling a business is rarely a single-step transaction. It moves through stages, and one of the earliest formal milestones is the letter of intent. Understanding what this document does before you sign it can shape how smoothly the rest of the deal proceeds.

Once a buyer and seller agree on the basic outline of a deal, the next step is usually a letter of intent, sometimes called a term sheet. For many first time buyers and sellers, the LOI is the first real legal document in the process, and it is easy to misunderstand what it actually locks in. Getting guidance from an experienced business attorney before you sign one can save both sides from confusion, and sometimes from a costly mistake, later in the deal.

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Acquiring a business is very different from starting one, and having an experienced business and corporate attorney involved from the outset can help you avoid costly surprises. When you buy an existing company, you are also buying its history, meaning its past contracts, its past compliance decisions, and in some cases its past problems. Thorough due diligence is what separates a buyer who understands exactly what they are acquiring from one who finds out the hard way after closing.

Every acquisition carries some risk that the business is not exactly what it appears to be on paper, and that risk falls squarely on the buyer once the deal closes. A seller who is eager to move forward will not always volunteer every issue that could affect your decision, not necessarily out of bad faith, but because they may not view certain items as material the way an outside buyer would. That gap in perspective is exactly what a disciplined diligence process, guided by an experienced business or corporate attorney, is designed to close.

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If you are thinking about selling your business in the next one to three years, working with an experienced business attorney early in the process can make a significant difference in how smoothly that sale goes. The single biggest mistake most owners make is waiting until a buyer shows interest before getting organized. By the time a letter of intent is on the table, due diligence moves fast, and any gaps in your records can slow the deal down, reduce your purchase price, or in some cases cause a buyer to walk away entirely.

The good news is that most of what buyers look for is well within your control if you start early. Here is a due diligence checklist to help you get ahead of the process.

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When buying or selling a business, one of the most important decisions is how the transaction will be structured. In most mergers and acquisitions (M&A), a deal is structured as either an asset purchase or an equity purchase (referred to as a stock purchase for Corporations or membership interest purchase for LLCs).

Although both approaches ultimately transfer control of a business, the legal, tax, and liability implications can be dramatically different. The choice between these two structures affects issues such as: (i) liability exposure (ii) tax consequences; (iii) transfer of contracts and licenses; (iv) regulatory approvals (if any); and (v) negotiation dynamics between buyer and seller

Understanding the pros and cons of each structure is critical for entrepreneurs, investors, and business owners considering a transaction. This blog gives a practical overview of asset purchases vs. equity purchases and how each structure works.

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