Buying A Business In Florida
Legal And Practical Issues

Starting and building a business from the ground up is challenging and time consuming. Despite Florida’s extremely friendly business environment the vast majority of new companies fail within the first five years of operation. There are simply a lot of risks involved in starting a new business.

Why start one when you can buy a company that has the ground work done for you, has an established record and accomplishes your objectives? Buying a business is often less risky than starting one from scratch. That is, as long as you have fully evaluated the fundamentals of the target company and fully understand what you are buying.

Advantages of buying a business:

1. Business processes are already in place.
2. It’s a proven profitable concept.
3. Its future can be measured against its past.
4. The brand is already established.
5. A well trained team is already in place.
6. Already a positive cash flow.
7. Fixed costs are known.
8. Lines of credit are already established.
9. Vendor agreements are already in place.
10. There is an established base of clients.
11. Reduced Risk

Disadvantages of buying a business:

1. Industry may be in decline or competition on the rise.
2. Critical facilities and equipment have been neglected.
3. The business’s reputation may need rehabilitation
4. There could be staff problems.
5. You could get stuck with bad contracts and leases
6. Previous success of the business relied heavily on the personality of the seller.
7. Profitability and success exaggerated by seller.
8. Seller could be hiding problems
9. Problems with current office and facility locations

Granted, buying an existing business can be more expensive upfront than starting one. And just because it has been profitably in operation for years does not mean there is no risk involved. However, if you buy the right business, one that meets your objectives, is operating properly, and has good underlying fundamentals, it can be very profitable.

Are you going to purchase just the assets of the business? Or, are you going to purchase the business itself; along with the assets. In other words do you want to structure the deal as an asset purchase? Or, do you want to structure the deal as a stock purchase? Yes, you could also merge the two companies. Right now, we’re focused on buying a business. Adding a discussion about mergers will simply muddy the waters.

As a buyer you have to decide how you want to structure the deal. This is one of the most critical decisions you will make.

Here are a few other things you may want to think about when considering buying a business via an asset purchase agreement or a stock purchase agreement.

Here are some of the Pros and Cons from a buyer’s perspective:

Purchasing Assets of the Company

From a buyer’s perspective structuring the deal as an asset purchase is far more advantageous. The buyer does not assume any of the business’s liabilities. And, they receive some tax benefits from purchasing new assets. Moreover, the buyer is not stuck in any poorly negotiated vendor, sales or employment contracts. The big advantage of only buying the assets of a business is that you do not acquire the bad decisions of the previous business owner as well.

Pros of an Asset Purchase

1. No legal liability.
2. You do not have to clean up a poor reputation or credit profile
3. Not stuck with poorly crafted contracts.
4. Not stuck with disadvantageous equipment / facilities leases
5. Tax advantage of new assets

Cons of an Asset Purchase

1. More work to get business back in full operation.
2. Leases will have to be renegotiated and signed.
3. Vendor contracts will have to be resigned.
4. Refile for licenses and permits.
5. More difficult to retain current employees.
6. Lines of credit will have to be reestablished.

Purchasing Stock/Shares of the Company

In general, the seller will prefer to structure the deal as a stock purchase and not as asset purchase. First, structuring the deal this way will likely be more tax friendly. Second, selling the entire company to you; lock, stock and barrel, means they are out from under any liability associated with the business.

Pros of a Stock Purchase

1. Turn key business ready to go.
2. Established credit
3. No public notification of sale
4. Vendor & Sales contracts are in place.
5. Facility and equipment leases are in place.
6. Key employees are in place.
7. Federal, state and local licenses and permits are in place

Cons of  A Stock Purchase

1. You can be held liable for previous owner’s poor decisions.
2. Potentially stuck with poorly crafted contracts
3. Potentially stuck with disadvantageous equipment / facilities leases
4. Unknown HR lawsuits
5. Unknown business lawsuits or contract disputes
6. No tax advantages

Because we have been representing business owners and stakeholders for decades, the business law attorneys at Walsh Banks Law have the experience and in-depth knowledge necessary to protect your interests when buying a business.

We can offer professional, solid legal advice throughout all aspects of the transaction, from preliminary considerations, to negotiations and outlining the terms of the transaction. Additionally, our lawyers will assist by drafting the letter of intent, conducting due diligence review, and negotiating any adjustments to the purchase based upon our inspection.

Our team is also ready to enforce your rights or defend your interests if any disputes or compliance issues arise out of acquisition of a company. We have extensive litigation experience fighting for businesses of all types and sizes.