The complete guide to buying a business

A perfect guide for entrepreneurs

Whether you just want an overview of the business buying process or you're ready to acquire an existing business, you know you'll need to finance, negotiate and structure the deal and protect yourself from unpleasant surprises. The Complete Guide to Buying a Business will give you everything you need to know including more than two dozen crucial forms and legal documents to help you do it. You'll learn how to:

find the right business analyze the seller's numbers make sense of the tax issues avoid outstanding liens and liabilities prepare and sign a sales agreement close the deal prevent the seller from competing against you work with lawyers, accountants and brokers

The 4th edition of The Complete Guide to Buying a Business is completely updated to reflect the latest laws and tax information.

• I Your Companion for Buying a Business p. 1
• Is This Book for You? p. 2
• Will You Need to Hire Lawyers, Accountants, or Other Professionals? p. 4
• Part 1 Overview of the Process
• 1 Thinking About Buying a Business p. 7
• Business-Buying Worries p. 9
• Which Kind of Buyer Are You? p. 9
• Three Ways to Become a Business Owner p. 11
• The Basics of Buying a Business p. 16
• Key Steps in Buying a Business p. 18
• 2 The Key Legal Issues in Buying a Business p. 27
• Understand the Differences Between Buying a Business Entity and Buying Just Its Assets p. 28
• Consider Forming a Corporation or LLC to Buy the Business p. 31
• Be Clear on What You'll Buy and What the Seller Will Keep p. 32
• Pay Special Attention to the Transfer of Intellectual Property p. 33
• Know the Legal Consequences of Not Making Installment Payments on Time p. 34
• Assure That There Are No Liens on Business Assets p. 36
• Protect Yourself From Competition by the Seller p. 36
• Limit Your Legal Liability for Past Obligations of the Business p. 37
• Comply With State and Local Laws That May Affect Your Purchase p. 40
• 3 Tax-Saving Strategies p. 43
• Understanding Business Write-Offs p. 44
• Buying Assets vs. Buying the Entity p. 48
• Allocating the Purchase Price in an Asset Sale p. 50
• Writing Off Purchase-Related Expenses p. 57
• 4 Finding the Right Business for You p. 61
• Before You Begin p. 62
• Attractive Businesses May Be Nearer Than You Think p. 63
• You May Be a Strategic Buyer p. 66
• Finding a Business by Word of Mouth p. 71
• Finding a Business Through Advertising-Yours and Theirs p. 71
• Business Brokers Can Help Find Sellers p. 75
• What Sellers Want to Know About You p. 75
• 5 What's the Business Worth? p. 79
• There's No Universal Pricing Formula: Many Factors Affect Price p. 80
• Sales of Comparable Businesses p. 82
• The Asset-Based Approach p. 83
• The Income Valuation Approach p. 84
• Industry Formulas and Rules of Thumb p. 86
• How Appraisers and Other Experts Can Help You Decide on a Fair Price p. 87
• Putting Together All the Information p. 89
• 6 Working With Lawyers, Accountants, and Brokers p. 91
• Lawyers p. 93
• Accountants p. 97
• Business Brokers p. 99
• Part 2 Getting Ready to Buy
• 7 Financing Your Purchase p. 103
• Lump Sum Purchase p. 104
• Installment Purchase p. 104
• How Sellers Try to Protect Themselves in an Installment Sale p. 107
• Show Me the Money: Where You Can Get Funds for a Lump Sum Purchase or Hefty Down Payment p. 110
• The Difference Between Loans and Equity Investments p. 114
• 8 Structuring Your Purchase p. 117
• Asset Sale vs. Entity Sale p. 119
• The Seller's Future Role p. 124
• Restrictions on the Seller: Noncompete Agreements p. 128
• The Future of Key Employees p. 130
• 9 The Investigation Stage: How Buyers and Sellers Check Each Other Out p. 133
• Your Investigation of the Seller's Business p. 135
• Paperwork the Seller Should Provide p. 137
• The Role of Confidentiality Agreements p. 151
• Information to Garner From Other Sources p. 152
• Why and How the Seller May Check You Out p. 157
• 10 Drafting a Letter of Intent p. 163
• Why Use a Letter of Intent p. 164
• What to Put in Your Letter of Intent p. 165
• Why You Should Only Sign a Nonbinding Letter of Intent p. 167
• Format for a Letter of Intent p. 168
• Part 3 Preparing the Sales Agreement
• 11 Preparing the Sales Agreement and Other Legal Documents p. 177
• Overview of Your Sales Agreement p. 178
• Related Legal Documents p. 183
• Well-Drafted Documents Are Crucial p. 184
• Preparing Your Sales Agreement and Related Legal Documents p. 185
• How to Prepare Attachments to Your Sales Agreement p. 187
• Steps in Finalizing Your Sales Agreement and Other Documents p. 188
• Amending Your Sales Agreement p. 189
• 12 Who's Selling, Who's Buying-And What Is Being Purchased p. 193
• Naming the Parties p. 194
• Identifying the Business and What You're Buying in an Asset Sale p. 198
• Identifying the Business-and What You're Buying in an Entity Sale p. 203
• 13 The Sales Price and Terms of Payment p. 205
• Sale Price: Asset Sale p. 206
• Inventory: Asset Sale p. 211
• Dealing With the Purchase of Accounts Receivable: Asset Sale p. 213
• Sale Price: Entity Sale p. 214
• Deposit p. 216
• Payment at Closing p. 216
• Promissory Note p. 218
• Security for Future Payment: Asset Sale p. 219
• Security for Future Payment: Entity Sale p. 221
• 14 Dealing With Liabilities and Representations p. 223
• Liabilities in an Asset Sale p. 225
• Liabilities in an Entity Sale p. 228
• Representations: What They Are and Why They Matter p. 229
• Seller's Representations p. 231
• Buyer's Representations p. 232
• 15 Payment for Noncompete Agreements and Consultant Deals p. 239
• Seller's Agreement Not to Compete With the Business After the Sale p. 240
• Seller's Agreement to Work for Your Business After the Sale p. 242
• Current Employees of the Business You Are Buying p. 244
• 16 Other Important Legal Language for the Sales Agreement p. 245
• Contingency Clause p. 246
• Closing Arrangements p. 247
• Dispute Resolution Clause p. 250
• Technical Contract Clauses p. 252
• Additional Optional Clauses p. 255
• 17 Signatures on a Sales Agreement p. 257
• Required Signatures for Sole Proprietors on a Sales Agreement p. 258
• Required Signatures for an Entity on a Sales Agreement p. 259
• A Spouse's Signature on the Sales Agreement p. 261
• Signature Clause in a Sales Agreement p. 263
• Typical Formats for Signing a Sales Agreement p. 263
• Accepting Personal Responsibility for Commitments in a Sales Agreement p. 267
• Signing the Sales Agreement p. 269
• Part 4 Preparing the Promissory Note and Other Sales Documents
• 18 Promissory Notes and Other Installment Payment Documents p. 273
• The Promissory Note p. 274
• The Security Agreement p. 284
• The UCC Financing Statement p. 293
• Escrow Agreement for Entity Sale p. 294
• 19 Bill of Sale, Lease Assignment, and Other Documents for Transferring the Business p. 305
• Bill of Sale: Asset Sale p. 307
• Bulk Sales Compliance p. 312
• Assignments in an Asset Sale p. 314
• Transferring an Entity p. 326
• Assignments in an Entity Sale p. 327
• Your Entity's Approval of a Business Purchase p. 328
• 20 Documents for Noncompete and Future Work Commitments p. 333
• Covenant Not to Compete p. 334
• Contract for Employment p. 340
• Contract for an Independent Contractor p. 343
• Part 5 Closing the Deal
• 21 Preparing for a Smooth Closing p. 351
• Where and When to Hold the Closing and Who Should Attend p. 352
• Documents for Transferring Assets p. 354
• Documents for Transferring an Entity p. 356
• Handling Last-Minute Problems p. 356
• Looking Ahead p. 358
• 22 Running a Small Business: Some Legal and Tax Basics p. 359
• Entity Concerns p. 360
• Safe Business Practices for Your Corporation or LLC p. 363
• Tax Basics p. 365
• Insuring Your Business p. 367
• Negotiating a Favorable Lease p. 368
• The Road to Success p. 372
• Appendixes
• A How to Use the Interactive Forms on the Nolo Website p. 373
• Editing RTFs p. 374
• List of Forms Available on the Nolo Website p. 375
• B Sample Sales Agreements p. 377
• Sample #1 Asset Sale of a Restaurant by One Sole Proprietor to Another p. 378
• Sample #2 Entity Sale of a Bookstore by the Two Shareholders to an Individual p. 386
• Sample #3 Asset Sale of a Landscaping Business by a Single-Owner LLC to a Partnership p. 393
• Index p. 403