Business purchases and sales can become very complicated very quickly. Generally speaking, when we talk about asset purchases we are talking about purchasing the assets owned by one business with the intent that the assets will be owned by another. What does this mean?

Let's say you are interested in purchasing a business. You could do this in one of two ways. The first is you could merge your company with the entity you are acquiring. This is fine and good from a continuation standpoint, but you will be assuming all the outstanding liabilities of the predecessor business if you do this. So, the alternative approach, and the one taken by The Taormina Firm when advising clients, is to form a separate LLC or other entity, purchase the assets held within the business you are purchasing, and transfer them into your business. By doing this, you are not assuming the liabilities of the predecessor company. In essence, once you purchase those assets, you are starting fresh with very little hanging over your head in terms of liabilities.

Buying and selling business requires a lot of due diligence. Before assets can even be purchased, audits and valuations must be accomplished. From there, your attorney and accountant will work together to figure out the potential tax implications of your purchase/sale, review the predecessor company's books and records, and determine what, if any, outstanding liabilities there may be. The Taormina Firm will review each contract entered into between the existing business and ensure that they are assignable to the new business. The due diligence phase of an asset purchase can take quite a long time depending on the size of each company. Patience in this phase is key.

Once the due diligence process is over, The Taormina Firm will work on an asset purchase agreement. Depending on whether the client is the buyer or seller, The Taormina Firm will both draft and negotiate the asset purchase agreement. This includes negotiating which liabilities the companies will be responsible for, as well as non-compete, non-disparagement, and indemnification provisions. This process can take quite a bit of time too depending on how aggressive the client wants to be. For instance, the client may wish to purchase the business "as-is" or may wish for the seller to retain some liability. It all is a matter of preference for the buyer/seller after discussion with The Taormina Firm.

Because of the complicated nature of these sorts of transactions, The Taormina Firm charges a base rate of $5,000 for asset purchases under $500,000. For anything over that amount, The Taormina Firm takes 1%.

If you would like to buy or sell a business, please contact The Taormina Firm.