Lesser-Known Options for Buying and Selling Businesses

For those with dreams of business ownership, starting a business from scratch may seem like the best option. After all, startups give you the opportunity to develop the business according to your exact specifications. However, there are considerable disadvantages associated with this approach. For many entrepreneurs, buying an existing business is the better option. If you are interested in buying a business, expanding an existing business, or selling a business, consider these lesser-known alternatives in addition to the traditional approaches.   

Stock Purchases and Asset Purchases

In an asset purchase, the buyer obtains some of the business’s assets and liabilities while the seller continues to run the business with the remaining assets and liabilities. The buyer is free to form a new business with the assets he or she has acquired or add these assets to an existing business.

A stock purchase involves buying equity in a corporation. This option is not available for partnerships, sole proprietorships, or LLCs; however, for business entities that offer partial ownership through stocks, this is often an attractive option to both buyers and sellers. Because the titles of business assets are contained within the corporation, stock sales do not require separate transfers of each asset.

Of course, each of these options comes with unique advantages and disadvantages. For burgeoning business owners, it is crucial to consider the potential tax ramifications and liabilities that may result from asset purchases and stock purchases.

Mergers and Acquisitions

Many small and medium-sized business owners assume that mergers and acquisitions are only for multi-million-dollar corporations, however, this is simply untrue. A merger typically involves two or more businesses agreeing to join their companies together to reach a shared goal. The goal may be to reduce the cost of operations, expand into a new market, or broaden the companies’ scope of products and services.

Acquisitions involve a more profitable company buying shares of another company in order to gain control over that portion of the business. If the buyer acquires the entire company, the company is absorbed by the purchasing entity. Savvy business owners may even eliminate the competition by buying the business through an acquisition. However, successfully doing so requires exhaustive due diligence. Mergers and acquisitions may also require owners to restructure the company as a new business entity.

Work with Experienced Legal Counsel to Avoid Mistakes and Oversights

Whether you want to acquire a struggling business, merge your company with another, buy shares of an exiting company, or sell your business, it is always important to work with a skilled legal counsel. Your attorney’s job is to ensure that the sale or purchase goes as smoothly as possible and that your gain the maximum benefit from the sale or purchase possible. Your attorney can negotiate the terms of the transaction and formalize these terms into binding legal agreements.

Call Us for Dependable Legal Guidance

Stock purchases, asset purchases, mergers, and acquisitions are just some of the strategies you may utilize when pursuing your entrepreneurial dreams. The Naperville business law attorneys at the Gierach Law Firm can help you explore all of your opportunities and approach these opportunities in a way that reduces risk and protects your interests. Call us at 630-756-1160 today and set up your confidential consultation.  

Sources:

U.S. Small Business Association

Investopedia