Buying A Business in New Jersey
Buying an established business, with established good will, existing clients, experienced employees, and existing assets, can be a great opportunity. However, buying a business in New Jersey is also a complex transaction. Our experienced business attorneys will aggressively represent you through every step in the process.Business purchases may be structured in a variety of forms under New Jersey law, such as a stock purchase, a purchase of some or all of the business’s assets, or a merger. While the result may be the same – obtaining the business – the form can have significant effects, such as tax consequences and whether the buyer or seller will be responsible for the business’s liabilities.
Our lawyers have decades of experience representing New Jersey business buyers, and can help you with this complex, and important, transaction, from initial negotiations through closing, and then on through as an operating business.
Negotiating the Deal
A value must be placed on the business before a buyer can make an informed start to negotiations. There are many factors which go into valuing a business. On the positive side these include revenue, profits, tangible and non-tangible assets, equipment, intellectual property rights, and good will. On the negative side they include debt, judgments, liabilities, environmental issues, union contracts, and structural costs. We help buyers in understanding the true value of the business, a vital first step to any negotiations. Our background helps us in this area. For instance, Frank Nardi is both a certified public accountant and a certified financial planner.
Once the buyer has determined the business’s value (which may be more or less than the seller thinks it’s worth), it can determine what it is willing to pay. Often this is expressed to the buyer in a letter of intent, which will contain the price, and often other major terms briefly stated. The letter of intent is non-binding, but it is important because it demonstrates the buyer’s serious interest in acquiring the business, and sets the terms of the negotiation over a formal contract for the sale of the business. Our business attorneys help buyers draft letters of intent which further negotiations while protecting their interests.
Negotiating and Drafting the Contract
Once the parties have agreed on the price and the general terms, the next step is negotiating and drafting the contract for sale. Under the law in New Jersey, contracts govern the terms of the sale. They set the terms of the deal, and the parties’ rights and remedies. It is normally the most important part of the transaction.
Contracts typically contain the price and warranties. The Contract will list exactly what is being sold, and for how much. It will establish who is responsible for the business’s liabilities. It will contain restrictive covenants. It will establish current and future liability for environmental problems.
The contract will cover financing for the deal. Financing may come from a bank, or the seller may agree to have part of the purchase paid price over time (known as “seller financing”). If there is a payment schedule over time, it will normally be contained in a promissory note with security provisions.
The contract will also deal with real estate issues. It will govern the concurrent purchase of property. It will provide for how to deal with existing tenants. If the business rents, it will address transfer of the lease.
Due diligence is crucial in any business purchase. It is important to know what you are buying. This means examining the business’s financial records, liabilities, cash on hand, loans, accounts payable, accounts receivable, client lists, environmental issues; doing lien and judgment searches; and inspections of the business’s equipment, property, buildings, leases, inventory. When industrial businesses or commercial property is involved, it will be necessary to conduct environmental inspections. It is important to ensure that the company is meeting its legal requirements to carry on its operations, including confirming that the business has all necessary governmental permits, that there are not any outstanding violations, and that it has zoning approval.
You have just spent good money to buy a business. This normally includes the business’s customers and good will. The last thing you want is for the person you just bought the business from to open up the same type of business next door, or taking the clients or employees of the business which you just bought for his next venture. A well-written restrictive covenant can prevent this. Examples of restrictive covenants include non-compete agreements, non-solicitation agreements (preventing solicitation of customers), and no-raiding agreements (precluding solicitation of employees). Our business attorneys are experienced at writing restrictive covenants which are enforceable and which protect our clients’ rights.
Agreements Between Owners
Businesses may be in many different forms, such as partnerships, limited liability companies (LLC’s), S corporations, or C corporations under New Jersey business law. Regardless of the form, much, it is important to have an agreement between the new owners of the business. However much the owners trust each other, and however optimistic they are, the pressures of running a business inevitably lead to disputes. Therefore, an agreement establishing the owners’ compensation, rights and responsibilities is essential before the business starts. Our business attorneys are experienced in drafting partnership agreements, shareholder agreements between the owners of corporations, and operating agreements for the owners of limited liability companies, which protect their rights and comply with New Jersey business law.
Our attorneys also help new business owners in a wide variety of areas, such as drafting employment contracts and manuals, preparing customer and vendor agreements, and collecting accounts receivable. We are a full service business law firm, and can help your business with all its legal needs.
Call us at (973) 890-0004 or e-mail us to speak with one of our business attorneys about your business purchase.