The source of change can be from a new competitor within the industry or the economy itself, causing a business to soar or stumble during the period of negotiation, and directly affecting the price originally agreed on by the parties. In the event that such a change in business should occur, the parties should document a mathematically based formula for recalculating the purchase price of the business, or even perhaps offer the buyer the option to back out if the business fails below a certain predetermined point. Finally, a hold harmless or indemnification agreement should be well documented. Such an agreement can offer protection to both parties for certain losses arising after the sale. Terms of this sort of an agreement like total dollar amounts, threshold amounts, time limits, or any collateral should be included in the documents.
Taxes are always a consideration when it comes to buying or selling a business.
The tax considerations typically depend on the form of the business. Two popular forms of operating a business are the regular C corporation and the S corporation. The tax consequences of each are worth mentioning in this article. The most popular form of doing business is still the regular C corporation. What is key to distinguishing this form of business from the S corporation is that the regular C corporation is a separately taxed entity.