Contracts You Have to Sign When Buying or Selling a Business

One of the duties of a business broker Orange County is to help you with the paperwork. In the sale or purchase of a business, you will come across several contracts. Making sure you understand each of these contracts is the key to avoiding trouble down the road. In this article we shall be taking a quick look at the main contracts you need to be familiar with as a business buyer or seller.

Contracts with advisers
There are several contracts you will need to sign. The first will be a contract with the financial adviser for the tax and finance advice. You will also need to sign a contract with a solicitor for legal advice. Another contract you will not be able to avoid is that with the business brokers Orange County. Prior to signing any of these contracts, it is imperative that you read and understand every term and condition. Don’t be afraid to negotiate the terms in the contract. Needless to say, you should only sign a contract with a professional that you have confidence in.

Confidentiality agreement
The purpose of this contract is to ensure that business secrets don’t get in the wrong hands. This contract is mostly drawn up by a business broker and has to be signed by a potential buyer before being shown the sales memorandum. The contract is also referred to as the non-disclosure agreement.

Sales memorandum
This is the document that introduces a buyer to the business he is interested in buying. This document includes vital information about the business. The important details you will find include the following:

  • Business sector
  • Duration the business has been trading
  • Main financial details such as profit, total debt, cash flow and asset value
  • Structure of the sale. Are you selling the whole business or part of it?
  • Number, age, job description, length of service and salaries of the staff
  • Location of the business premises, leasehold, rent and rates

Purchase offers
The purchase orders have to be made in writing. After giving an initial verbal offer, a buyer must then provide a letter that sets out the main details. The offer given should be subject to contract. A good offer will include the following:

  • What the buyer is offering to buy
  • Offer price and the payment terms
  • Information required by the buyer prior to making the offer.

The four are the main contracts you will have to sign when selling or buying a business. The best news is that business brokers Orange County will help with all the paperwork. You also need to involve your lawyer in order to confirm if the contracts are legally binding.

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