Legal Issues Regarding Business Transitions

In addition to financial issues and considerations, there are numerous legal issues involved in a transition. An attorney experienced in the nuances of business transitions should always assist the buyer in the following issues:

What is being purchased • The physical location • The goodwill of the location (including the client base) – How the seller transfers goodwill to the buyer – The terms and conditions of the seller’s non-competition and non-solicitation agreement after he/ she leaves – Whether the current owner will stay on to help the business transition into new ownership – Receivables – Whether the seller is selling stock in the entity owning the business or the assets of the business

Location • Lease agreements – Basic terms of the lease – Duration of the lease – Options to renew the lease – Renewal terms • First Right of Refusal to purchase the real estate

Restrictive covenants • The seller’s non-competition agreements and non-solicitation agreements, which prohibit former employees, partners, or owners of the business from competing with the new business

Liabilities • Lien searches on the business’s assets

Tax consequences • Tax consequences of the transaction • How much tax the seller will be required to pay as a result of the sale (personal or corporate Goodwill)