How to Close a Purchase and Take Over Ownership when Buying a Business for Sale
By: Buy Me A Business
Tags: Ownership, Buying A Business, Business, Business For Sale, Deal

Closing the purchase of your new business and taking over ownership go hand in hand. You cannot take over ownership without first closing the deal. When you close, you automatically take over ownership. This stage in your life is the beginning of your life story as a new business owner. Congratulations! You’ve made it to the American Dream. A meeting is normally held in an office of the closing attorney or the escrow agent. This is where the seller and the buyer come together to buy or sell the business. The buyer is to pay the agreed upon price, and the seller then transfers ownership of the business assets to the buyer, or a corporate agency if one is designated. A lot of preparation goes into ensuring this process runs smoothly. We suggest that you have a written closing checklist of things that you need to be done and who is supposed to do them.

The first decision that needs to be made is deciding who will draft the closing documents and who will close, or manage the closing. In smaller business closings, the attorney can serve as an escrow attorney, but then they cannot represent the buyer or the seller. The attorney is hired to manage the process and close the deal. Sometimes the buyer and seller will split the fee for this. We need the seller’s goodwill after closing to transfer assets properly. This includes introducing the buyer to employees, customers, vendors and more!

Small business sales and acquisitions are all about the relationships. The relationship at the closing table is not over, it’s only just beginning. Always be sure to pick an attorney that has experience in closing business transactions. When you’re working with a business broker, be sure to ask for all suggestions for experienced business attorneys that can assist you. When you’re using an escrow attorney service, it’s wise to get the closing documents a few days before closing to have your attorney go over the documents on your behalf. Always ask about fees when first meeting with attorneys.

Once you have identified and obtained a commitment on any needed financing, you can begin to set up the closing and begin to prepare for the takeover of ownership of the business. The steps for this are as follows:

Determine who the actual owner of the assets is. The attorney will have to conduct a search with the secretary of state to verify that the corporate entity is in good standing. Upon closing, the approval of the landlord and/or new lease agreement should be executed. Determine how the buyer is planning to take the title of the assets, either personally, through a partnership or a corporation. The seller will be required to provide a list of stock, furniture etc that is to be transferred during closing. Any and all existing contracts, leases and agreements need to be brought forward from the seller. Determine if you need to apply for any local/state permits or licenses. Determine if you have to deal with any franchise agreements or first right of approval issues. Closing documents must be drafted in relation to the offer of purchase and the contingency agreement between the buyer and the seller. Copies need to be given to the seller, any involved brokers, and the buyer. The buyer and seller both need to be happy with the contingencies. Have an accountant go over all of the finances to ensure all parties are on the same page. Everyone must agree upon a closing date and time. The buyer must obtain the funds for any additional down payment needed. You can usually do this through a cashier’s check or a bank check. The seller and the buyer must make arrangements to take a physical count of inventory and to verify that all equipment included in the sale is in good working condition.

The seller wants to see you succeed. You are their solution to selling their business. If you owe the seller money, then they will absolutely want you to succeed. Try and ensure closing appointments are earlier in the day so you have some extra time to work out any last minute issues. Ensure everyone is present that is needed to sign documents. Also be sure that the balance of the down payment is in a secured check form. All of the steps can ensure you have a successful closing deal. Congratulations, you have obtained the American Dream!