Buying or Selling a Business

You are considering buying or selling a business. This blog will briefly explain the basic considerations when buying or selling a business. The first legal consideration is liability. There are two types of sells when you purchase a business or you sell a business. The first type of sell is an asset purchase sell. This simply means that you are only purchasing the assets of a LLC or S corporation. Typically, an asset sale is good for buyers of a business. For example, Good, LLC is selling their business to Smith, LLC for $100,000. Smith, LLC is concerned or should be concerned about hidden liabilities that Good, LLC has not disclosed or does not know about. A good example of these hidden liabilities is payroll taxes. often times, these liabilities will not be found out until years after the payroll tax violations. With an asset purchase sale, the buyer only purchases the assets of the company or LLC and the seller assumes the liabilities. The advantage of an asset sale is each asset such as equipment, goodwill, and accounts receivable are given an asset purchase price. This means that you do not have to purchase all of the assets of a company or LLC. In most commercial transactions, an asset sale is common.

The second (2nd) type of transaction is a stock purchase sale or purchase of membership interests. In this example, a seller wants the buyer to assume all the potential liabilities. From the seller's perspective, the seller does not want any liability risks from their old business venture. Instead of purchasing and valuing each asset, the company is purchased for a specific dollar value. Any buyer must fully be aware of all potential and contingent liabilities. Again, stock purchase transactions are rare and most sellers and buyers understand that a buyer does not want the future or potential liability of a previous business owner.

Sean Robertson is a tax attorney concentrating in business law, tax planning, estate planning, and asset protection law. Sean Robertson graduated from DePaul University College of Law in 2003 and University of Illinois at Urbana-Champaign in 1997.

Sean Robertson can be reached at 312-498-6080 or 630-364-2318. Robertson Law Group, LLC has offices in Naperville, downtown Chicago, and Chicago Ridge, Illinois.