The term sheet helps to concretize the main problems that often arise when buying and selling a business in order to avoid the surprising obstacles that can arise on the way to closure. 1. The names and contact details of all parties involved in the purchase transaction — buyer, seller, buyer`s in-house counsel, seller`s corporate lawyer, names of all business brokers involved in the business and the names of financial advisors and/or accountants. If one of the parties is not a natural person, you must have all the legal information of the company (including the state of incorporation, the name and contact details of the director, etc.). 7. Agree not to compete. In general, the success of the business you buy has always been the result of managing and owning the business. Therefore, you may want to consider keeping these employees after the purchase of the business for continuity reasons and having them sign employment contracts or consulting agreements with you. If you have the expertise to run the business from Day 1 onwards, you may want to «buy» the benefit of having previous management and previous business owners compete with your newly acquired business. You want to enter into an agreement with non-compete commitments (sometimes referred to as a «non-compete agreement» or «forfeiture agreement for competition») to prevent sellers from immediately recruiting or competing with their former customers. Under New York law, agreements must not be in competition (or «non-competition» or «forfeiture for competition agreements»), as long as they are reasonable in duration and scope. In addition to the function, a term sheet serves as a template for the conclusion of the transaction, from which the share purchase contract or the asset purchase contract can be established.

4. Warranty (or guarantee) for the purchase price. If the business is sold with seller financing, the seller may want a guarantee for your promise to repay the loan. Perhaps the secured security is the share of the company, some or all of the company`s assets or business assets, or any other real estate or personal property you own. Of course, if you do not make the financing payments, the seller wants to be able to close or repossess the collateral that is pledged against the seller`s financing. 2. Purchase price and other consideration – Will it be a cash transaction or a combination of cash and other real or personal property, shares or intellectual property? It may require the seller to look for other buyers of the small business; and 9. Obligations of the seller after closing or obligations of the buyer that persist after the sale of the company. As described above, the Seller may continue to provide consulting services to the Company after the sale of the Company. You may have decided to enter into the transaction before all intangible consents have been obtained or before applicable taxes have had to be prepared and filed.

Any post-closing obligations to be included in the share purchase agreement or asset purchase agreement must be included in the term sheet. Which is better — an asset purchase or a share purchase of a company? At first glance, you may think that buying securities is more beneficial. In general, buyers prefer to buy assets for tax deductibility and choose preferred assets (without being burdened with liabilities). However, with a share purchase, you can buy the company as a running company with minimal interference in the business (and sellers prefer to sell the entire company with all its shortcomings and liabilities). Of course, the end result will be the price (a purchase of securities will probably be more expensive than the purchase of shares of a company). Assuming the business purpose is a corporation or limited liability company (LLC), you can structure the purchase in two ways: either a share purchase or an asset purchase. Both have advantages, and both can have significant tax implications. You should structure the transaction after seeking advice from your financial advisor or accountant.

The term sheet for buying a business tells the seller that you are serious about buying the small business. Depending on how the term sheet is designed, while you may have an «out» to move away from the acquisition of the business, it shows that you are determined to close the purchase. From a legal point of view, a sale of shares differs considerably from a sale of assets. In a share sale transaction, you buy all the shares of the company – so that the company`s assets, liabilities, goodwill, contracts, intellectual property and real estate assets remain with the company (provided that none of the documents relating to the company contain any prohibitions or conditions for the transfer). When you buy shares, you buy the «Lock, Stock and Barrel» business unit. It also means that you can also buy the company`s headaches (such as lawsuits and other contractual obligations). Thus, when you purchase the company`s shares, you and your corporate attorney must perform intensive due diligence regarding the company`s history, contracts, logbooks, financial reports, and records. With an asset purchase, you choose and buy the plum assets you need for your own business (or even a division of the seller`s business). When selling assets (or buying assets), liabilities and other business headaches stay with the seller. You can buy all or substantially all of a company`s assets in New York, with little risk of being held accountable for the company`s debts and obligations that arose before you bought the business. 6.

Transmission problems. Whether the company is sold as a sale of shares or as a sale of assets, you need to worry about whether there are any restrictions on the transfer of the company`s assets. When conducting due diligence, you need to determine (with the help of your in-house attorney) which assets may require prior consent for the transfer (such as commercial space leases, large contracts with customers or suppliers, or bank loans or loan agreements). Depending on how the restriction is formulated in the respective contract, a simple transfer of a possible portfolio or majority stake in the ownership of the company`s holdings may trigger the consent requirement. Here is a list of typical terms and other issues that need to be addressed in a term sheet to buy a business: As I mentioned in «Buying a Small Business in New York», you need to create a «Term Sheet» (also known as a «LETTER OF INTENT», «Letter of Intent», «MEMORANDUM OF UNDERSTANDING» or «Memorandum of Understanding»). This can be done when you and your in-house attorney perform your due diligence on the target company. 5. Structure of the agreement. Will it be an asset purchase or a share purchase? 8. Non-binding term sheet. As I explained in «Buying a Small Business in New York,» you should consider a «non-binding» term sheet (e.g.B.

if there are unforeseen events if you can opt out of the agreement without liability). Note, however, that the term sheet must be properly worded so that certain provisions of the term sheet are binding, such as, among others, the limitation of liability and confidentiality provisions (you do not want the seller to sue you or disclose your confidential information such as financial information). 3. Terms of payment. If it is a cash transaction, is it paid as a lump sum or in several instalments? If it is instalments, will it be related to profitability or other contingencies? If financed by the seller, at what interest rate and for how long? If it is funded by a third party, does the agreement depend on obtaining that funding? Will there be a deposit?. . . .

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