As a business lawyer in New Jersey representing and providing legal advice to small to medium size businesses I’m often asked by business clients and owners to assist them in buying, selling, and purchasing businesses which typically has me negotiating, reviewing or drafting an Asset Purchase Agreement (APA).
What are some legal issues, concerns and considerations when negotiating an Asset Purchase Agreement on behalf of a New Jersey business client purchasing a business:
1.What are the Seller’s liabilities – It is important when negotiating a contract for the purchase of a business for the seller to list all of its liabilities, debt’s and expenses. For starters, a buyer doesn’t want to walk into a situation where the seller has misled him or her about the financial condition or viability of the business. A buyer needs as much objective information to be produced by the Seller as possible so as to make an informed decision about what the true value of the company really is. The flip side is if a seller is truthful and discloses that his or her company has a ton of debt the buyer might be willing to take it on if it gets the business for a much lower price.
- Exposure to Employee lawsuits. One of the representations that a Seller should make in the APA is whether or not there are any lawsuits, threat of lawsuits or legal issues with past or present employees.
- Payment of FICA and taxes. Another representation that should be made by the Seller is that all taxes, FICA and unemployment taxes have been paid.
- Existing Contracts – The buyer should insist that the Seller attach to the APA a list of all existing contracts that it wants the buyer to assume. If the seller has made some bad deals a shrewd buyer will not want to take over those contracts.
These are just some of the legal issues to be aware of when negotiating a contract to purchase a business on behalf of a buyer in New Jersey.
The Law Offices of Andrew S. Bosin LLC is a full service business law firm located in Bergen County, New Jersey
www.njbusiness-attorney.com – 201- 446-9643