The last couple of days, we discussed starting a new business and some factors for consideration in purchasing an existing business. Now that you selected the business and negotiated a price the seller accepts, you get your financing in place. Preliminary plans for financing hopefully took place prior to negotiation for purchase. Having some financing committed makes purchase negotiations easier. See our previous articles about financing.

So now let’s finalize the sale!

The business property should be appraised by a commercial appraiser and of course the purchase price should not exceed the appraised price. At the end of negotiations the seller customarily receives a signed Earnest Money Agreement from the buyer. Both the buyer and seller sign a purchase contract and agree to a closing date when title of the business passes from seller to buyer.

The actual closing passes title and exchanges either money and/or a promissory note unless the sales contract specifies a contract for deed sale. Your attorney should review all documents prior to closing. The buyer’s attorney takes care of financing paperwork, leases, licenses and permits for the new owner and will advise you of necessary documentation for government authorities.

You may also need to sign for a lease of the premise if the premise is not part of the sale. Make note and begin the application process for any licenses or permits needed when you take over the business. Apply for the appropriate documentation such as an Employer ID number and bulk sales. Fix a day for a final inventory, final accounts payable and accounts receivable and inspection of the business. If the purchase takes place with a business broker, the business broker assists you in making sure all paperwork is on track and in hand at the closing.

The seller’s attorney draws up any necessary leases between seller and buyer, any promissory notes between seller and buyer, disclosing all liabilities and liens, documentation of accounts payable and receivables and provides the inventory.

Once you take over the business, remember to change all the locks so any outstanding keys don’t become a concern. Notify all employees and suppliers of the change in ownership and make sure your licenses and permits are all in order prior to commencing business.

As a business owner, welcome to a whole new world of challenges and rewards!