4. Have the Legal Documents Prepared
The buyer is generally responsible for preparing the legal documents, which are often complex and lengthy and are sent to the seller’s lawyer for review before being finalized. The first legal document, though, is short and simple; it is commonly called a “Letter of Intent” (or a “Term Sheet”) and is used to record the basic aspects of the deal early on. This helps to prevent misunderstandings and avoids having to renegotiate any key terms very close to the sale date.
The main legal document is called a “Purchase Agreement”. This covers everything connected to the purchase. It builds on the content of the Letter of Intent and includes, as efficiently as possible, the significant details of what the buyer and seller are actually agreeing to, and anticipates the situations where things may not go as planned. One of the most important parts of this agreement for you will be the seller’s “representations and warranties”. This effectively puts the seller on the hook for the information given to you about the business and aims to ensure that you are getting what you are paying for. The description of the business assets and liabilities related to the business that you will assume are another important part of this document. They are usually included in “schedules” attached to the main agreement.
Many purchases will also involve a document showing the consent of the landlord or franchisor, each of which might be necessary for the deal to move forward. Depending on the type of sale and individual situation of the business, there may also be other documents which your lawyer will need to prepare including the above mentioned Non- Competition Agreement.
4. Have the Legal Documents PreparedThe buyer is generally responsible for preparing the legal documents, which are often complex and lengthy and are sent to the seller’s lawyer for review before being finalized. The first legal document, though, is short and simple; it is commonly called a “Letter of Intent” (or a “Term Sheet”) and is used to record the basic aspects of the deal early on. This helps to prevent misunderstandings and avoids having to renegotiate any key terms very close to the sale date.The main legal document is called a “Purchase Agreement”. This covers everything connected to the purchase. It builds on the content of the Letter of Intent and includes, as efficiently as possible, the significant details of what the buyer and seller are actually agreeing to, and anticipates the situations where things may not go as planned. One of the most important parts of this agreement for you will be the seller’s “representations and warranties”. This effectively puts the seller on the hook for the information given to you about the business and aims to ensure that you are getting what you are paying for. The description of the business assets and liabilities related to the business that you will assume are another important part of this document. They are usually included in “schedules” attached to the main agreement.Many purchases will also involve a document showing the consent of the landlord or franchisor, each of which might be necessary for the deal to move forward. Depending on the type of sale and individual situation of the business, there may also be other documents which your lawyer will need to prepare including the above mentioned Non- Competition Agreement.
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