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What Are the 3 Stages of Purchasing a Business in Illinois?

Posted on in Business Law

Elk Grove Village business law attorney

Many business professionals dream of owning a business, but they may not want to start from scratch. While entrepreneurialism is a common way to own a business, it can also be daunting and risky. Building a business from the ground up involves much more than just coming up with a product or service. A business structure must be selected, a location for the establishment must be found, employees must be interviewed, hired, and trained, and that is just the tip of the iceberg. And did I mention the marketing and breaking into the chosen industry? An alternative to this risky endeavor is buying a business that is already established. While the company will still require time and dedication, the groundwork for the business has already been laid,  alleviating the risk of starting a new business. That said, buying a business also comes with its own risks that require the advice of a few experts, including a knowledgeable Illinois business law attorney.

Discovery and Research

Numerous businesses are for sale and you should never settle for the first one that you find on the market. First, you should decide which type of business you want to buy. Depending on your past professional experience, you may want to stick within the same field or you may have realized that you would like to forge a new path. Choosing the industry that you would like to work in and finding an appropriate-sized business for you is a critical first step. 

Once you have selected your criteria, there are a number of ways to research businesses that are currently on the market. You can take to extensive internet research, networking with friends and business associates, looking in the newspaper, or working with a business broker. Be sure to find out why the particular business is up for sale. Was the business plan inefficient? Is a critical employee retiring? Are there mounds of debt tied to the business? Are competitors squashing their business? Whatever the answer, it is important to enter into the purchase fully informed. How much is the business worth? What are its financial and legal and liabilities? Should the transaction be an asset sale or a stock sale? Once you decide that you want to purchase the business, your attorney will draft a Letter of Intent and the parties will begin the due diligence process.

Due Diligence

Similar to the discovery process explained above, the purpose of due diligence is to independently gather as much information and intel on the business that you intend on buying before actually going through with the purchase. This involves a bit more than just an Internet search. It is especially important to work with an attorney during this part of the business purchase process since you will be looking at the legal side of the purchase. There are a number of documents and legal areas that you should look into when considering buying a business, including:

  • Business licenses and permits

  • Organizational paperwork and chart

  • Environmental regulations

  • Zoning laws

  • Contracts and leases

  • Business financials

  • Status of inventory, equipment, furniture, and building

  • Tax clearance letters

  • Referral partners information and value

Negotiations and Closing

After you have finished due diligence, you will have either decided to purchase the business or to look elsewhere. If you have decided to move forward with the purchase, you will create a sales agreement with your attorney. The agreement should outline the final purchase price and the tangible, intangible, and intellectual property included in the purchase. You will then begin negotiating your purchase price with the business’ current owner. You may choose to value the business based on its past, current, and future profitability. Another common option includes weighing the business’ assets versus its debts and liabilities. You should also consider the market value of other businesses in the industry. Once you decide upon a purchase price and secure the capital needed to buy the business, you will then close the deal with the help of your attorney. There are a number of legal considerations that should be made, such as formulating a non-compete agreement so the seller does not set up a competing business.

Contact a DuPage County Business Lawyer for Help

Even divided into three steps, the business purchasing process can seem overwhelming. Investing in a business venture is never something that should be taken lightly. The skilled legal team at Shakfeh Law LLC supports our clients’ business dreams by helping them find and secure a proper-fitting business. Our knowledgeable Oak Brook business lawyer can guide you through every step of the purchasing process, from selecting the right business to signing the final documents. With nearly a decade of experience, Attorney Shakfeh is prepared to take on your case. Call our firm today at 630-517-5529 for help purchasing your future business. 

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