7 Important Considerations When Buying or Selling a Business

Buying or selling a business is a major decision that involves much more than agreeing on a price. Whether you’re the buyer or the seller, it’s essential to understand the key elements that will shape the transaction and impact both parties long after the deal is done. Here are seven important considerations to keep in mind during the process:

1. Is it a Stock Purchase or an Asset Purchase?

This is one of the most important decisions in structuring a business sale.

In a stock purchase, the buyer purchases the ownership shares of the company. The business entity remains intact—meaning all assets, liabilities, contracts, and obligations stay with the business and transfer automatically to the buyer. This approach is more common when buying a corporation or limited liability company (LLC).

In an asset purchase, the buyer purchases specific assets of the business (e.g., equipment, inventory, customer lists, intellectual property) but not the business entity itself. The buyer can choose which assets and liabilities to take on, offering more control and less risk. The seller typically retains any liabilities not included in the sale.

Each structure has its own legal, tax, and financial implications, so it’s important to work with experienced legal and tax professionals when deciding which is right for your situation.

2. Is it an All-Cash Deal or Will the Seller Finance Part of the Purchase?

Not every deal is paid in full at closing. In some cases, the buyer may pay a portion in cash and finance the rest through a promissory note, where the seller agrees to be paid over time. This is often referred to as seller financing and can make the deal more attractive to buyers, especially if third-party financing is not available. However, it also means the seller is taking on some risk and will need to assess the buyer’s ability to repay.

3. Is Real Estate Included in the Deal?

If the business operates from a physical location, it’s important to determine whether the real estate is part of the sale. In some cases, the property is owned by the seller and can be sold or leased to the buyer. In others, the business may lease space from a third party. This can significantly affect the overall value of the transaction and the buyer’s long-term operating costs.

4. Is the Buyer an Individual or a Business Entity?

Knowing whether the buyer is purchasing as an individual or through a business entity (such as a corporation or LLC) is important for legal and tax reasons. A buyer purchasing through an entity may have different financing arrangements, liability protections, and long-term plans for the business. This decision also impacts how the sale agreement is drafted and how risk is managed.

5. Does the Business Have Employees—and Will the Buyer Keep Them?

If the business has employees, the buyer must decide whether to retain them after the sale. This includes reviewing employment agreements, benefits, and payroll obligations. Employee retention can help preserve the continuity and value of the business, but it may also come with legal responsibilities and liabilities. Buyers should carefully evaluate the workforce before making decisions.

6. Does the Business Have Debt or Outstanding Obligations?

It’s critical to understand whether the business has existing debts, such as loans, taxes owed, unpaid vendor invoices, or pending legal obligations. In a stock purchase, these liabilities typically transfer to the buyer. In an asset purchase, the buyer may be able to avoid taking on those debts—but only if the transaction is properly structured. A thorough financial and legal due diligence process is essential to uncover any hidden liabilities.

7. Will the Seller Be Required to Sign a Non-Compete Agreement?

A non-compete agreement can prevent the seller from starting a competing business in the same industry or geographic area for a certain period of time after the sale. This is often crucial for buyers who want to protect the value of the business they’re acquiring. The terms of a non-compete must be clearly defined and legally enforceable.

Need help buying or selling a business? Give us a call. We can answer your questions, assist you with drafting or reviewing the purchase agreements, and help you make the right decisions throughout the business sale or business purchase process. Call 661-857-7777 today!

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The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your unique situation. We invite you to contact us and welcome your calls.