Buying a New York Business – What a Business Attorney can do for You

Buying a New York business involves many steps, legal considerations and documents.   I think almost anyone would be well advised to seek the help of a New York business attorney to make the purchase successful and legally sound.  This post is designed to give you an overview of my usual involvement in the process of buying a New York business.

At the time I am being approached to help with the legal aspects of buying a New York business, a potential client usually already has a particular business in mind and has an idea of its value.  (The process of finding and valuing a potential business target is a post in itself and I won’t address it here)

My first task is to make sure that the client understands what steps are involved in the purchase of a New York business, what investigations are required and what risks and problems may lay ahead.


First, the client has to thoroughly investigate the New York business.  I am not usually involved in the actual investigation and inspection of the business, but I will guide the client with respect to what he/she should look for and explain the significance of the client’s findings.  I will review all agreements, leases and other contracts.

If problems are discovered in the course of the investigation, I am there to help the client overcome such roadblocks. For example, if the client finds that there are liens on the assets of the business, I might consider incorporating a provision into the sales agreement that requires the seller to pay off such liens on or before closing of the transaction.  Similarly, if an agreement to be transferred to the buyer (for example the lease of the business)  requires a consent from a third party, I’ll make sure that the sale is conditioned upon receipt of such consent.

My laundry list of things to ask from the Seller:

  • a.  Tax Returns
  • b.  Financial Statements
  • c.  Leases
  • d. Contracts with vendors, suppliers, licenses, distributor agreements, insurances, equipment leases, and so forth
  • e. Corporate Documents (or LLC Documents) if the business is owned by a corporate entity
  • f. A list of the Licenses and Permits maintained by the business or its owners  (I will determine if other licenses are necessary and whether the existing ones can be transferred or new ones have to be obtained)
  • g.  A list of all the assets of the business, such as equipment, inventory, intellectual property
  • h. UCC Liens/Tax liens/Business Credit Report (I will conduct independent research into these matters)
  • i. A list of all the Employees of the business


At some point I will confer with the client about the desired structure of the purchase of the New York business.  The structure of a business purchase has important consequences for the potential liabilities of the buyer and his/her tax bill resulting from the purchase.  On occasion, I will cooperate with the client’s existing accountant to fully investigate and analyze all issues involved.

By way of background:   If the business target is a limited liability company (LLC) or corporation, the client has two options in structuring the purchase. He/she can purchase all of the assets of the business piece by piece (Asset Sale) or purchase the entire corporate entity that owns the business (Stock Sale).


It is often a good idea for the buyer to form a new entity, specifically for the purpose of buying and operating the to be purchased business.  If the buyer decides to do so, I will usually handle the formation and all issues surrounding the formation of such new entity.


Often, Seller and Buyer wish to document the rough terms of the proposed transaction in a  “term sheet” (also known as a “letter of intent” or a
“memorandum of understanding”). The term sheet is rarely longer than a
page or two, and should expressly state that it is non-binding on both
parties.  I may draft a term sheet or comment on one that has been provided by the Seller.


After a term sheet is signed (if there is one) and the client’s investigation of the business is almost completed, I
 will draft and/or review a number of agreements and
documents that are instrumental in the transfer of the business to the client, or to the entity formed for this purpose.

The most important document in a business sale is the “purchase 
agreement” (also known as the “sales agreement” or “acquisition
 agreement”). Often, the seller’s attorney will prepare the first draft 
of this document. Unfortunately, that doesn’t always mean that I will have less work to do. If the seller’s attorney is inexperienced 
or just plain unreasonable, the review of a bad or one-sided agreement might take more time than preparing it in the first place.

I may also prepare a “closing checklist,” which is a
 list of all of the documents and agreements that need to be drafted and
executed, and of all actions that need to occur on or before the
closing of the sale.

In drafting a purchase agreement and other documentation for the buyer, I will make sure that the term sheet is accurately reflected, that the buyer is properly protected from misrepresentations of the seller and from prior liabilities of the business.  If desired, I may draft provisions that provide for continued assistance of the old business owners for a period of time, provisions that prevent the old owners from competing with the buyer after the closing and any other specific terms of the deal.

Other documents usually required to be drafted are:  promissory notes (if the buyer purchases in installments), security agreements (if the buyer gives security for the outstanding purchase price in installment sale), guaranties by the buyer personally, financing documents, a bill of sale to transfer assets….and so forth, no deal is really like the other


The closing is the last step in the purchase process.  The parties and their 
attorneys get together to exchange money and property and take care of
all remaining paperwork.   I make sure that every document is exchanged and properly executed.

Some closings are uneventful. Others can 
include last-minute negotiation of agreement terms, waivers of 
representations, temper tantrums, and so forth.
  If all documents are in final versions prior to  the closings, the parties may agree to exchange signature pages over email, wire the necessary funds, and conclude the closing over the phone.


I like to charge flat fees for my help in a New York business purchase.  However, no deal is alike and I usually first talk to a potential client to assess the likely work involved.