Numerous businesses all over Texas are for sale every day, and people need to understand market dynamics and other concerns whenever they are considering buying or selling any business in the state. If you are currently trying to buy or sell a business in Texas, be sure that you have a Texas business attorney assisting you with all of the legal requirements that will be involved.
Buying an existing business can seem like a safer career path than beginning their own company, and people who are ready to move on can become willing to sell their businesses when they believe the time is right. It is important to begin by knowing whether you will be involved in an asset sale or an entity sale, with the former involving some or all of a business rather than an entire business itself and the latter being an entire business entity outright.
Buying a Business in Texas
When you are considering buying any business in Texas, you need to begin by asking yourself why the business is for sale. A retiring owner will be very different from a business being sold because it is underwater.
Make sure to do your due diligence, meaning inspect everything about a business, including its tax and financial records, physical assets, real estate, intellectual property (IP), licenses and permits, workforce as well as compensation and contracts, insurance coverage, existing material contracts, and customer information. Try to obtain financial records for at least the previous two years of operation.
When you think you know the business you want to buy, make sure that you and the seller have a firm agreed-upon price for the company. When you know you are serious about a purchase, sign a letter of intent that will be a non-binding agreement that includes necessary terms and conditions of a sale.
You cannot be penalized for walking away from a letter of intent. You may also want to seek a non-compete agreement from the owner to ensure they do not walk away and simply start a new company in the same industry that recoups their previous customers and takes away yours.
You can then be ready to move on to the purchase and sale agreement, which will detail what you are purchasing. All business assets must be listed in this agreement, as well as any exceptions, warranties, or liabilities.
A purchase agreement should also stipulate the final price of the sale and payment terms. When a buyer and seller have different opinions about the current value and future potential of a business, they could compromise and include an earn-out provision in a purchase agreement.
You will also want to get an itemized list of all sale contents before purchasing a business. The list can include fixtures, inventory, trademarks, and patents, and it should appear on your purchase and sale agreement.
Also develop a transfer plan for any interruption in services or operations. This will allow the business, employees, and operations to continue working through a change in ownership.
Selling a Business in Texas
When you are considering selling your business in Texas, make sure first that you are truly ready to sell your company. The Exit Planning Institute reports that 75 percent of business owners profoundly regret selling their businesses within one-year post-transition.
If you decide that you truly are ready to sell, then you will have to get your books in order so a potential buyer can have all the information they will need. Work with your accountant to try and make sure you have your property tax information and all of your financial statements for the past five years.
Also work with your accountant to fully understand the tax implications of a sale. You may have to pay capital gains taxes to the Internal Revenue Service (IRS) or other income taxes.
Know how you plan to seek potential buyers, including possibly working with a broker. Always make sure you are working with a Texas business attorney.
When you meet a potential buyer, prepare to negotiate a final sale price. Your negotiations may be about much more than just the sale price, as the buyer could also have demands about your employees or other concerns.
After agreeing to terms with a buyer, you can sign a sales agreement and then close and transfer ownership. You will have to file the necessary paperwork with the IRS, including Form 8594, Asset Acquisition Statement Under Section 1060.
Call Us Today to Speak with a Texas Business Attorney
If you are either buying or selling a business in Texas, do not try to handle everything by yourself. When you work with a Texas business lawyer, you will be able to know that you are doing everything that is required and feel confident that your decision is being handled the right way.
Are you looking to buy or sell a business in Texas? Structure Law Group, LLP can help to make the process as smooth and stress-free as possible. Our experienced Texas business attorney can provide the guidance you need to reach your goal without any unexpected problems. Give us a call today at (512) 881-7500 or contact us online to arrange a consultation and learn more about how we can help.