What do I need to know before buying a business in Florida

Nov 14 19:43 2020 David Steinfeld Print This Article

It is critical to do your due diligence before buying an existing Florida business. Florida law deems those who participate in business ventures to be sophisticated businesspeople to a certain degree. While the level and amount of due diligence depends on the particular transaction, you should at least undertake some due diligence before closing.

What due diligence should I do The primary goal of business due diligence is to test the veracity of the representations of the seller. The due diligence that you can do before buying a Florida business can include reviews of the internal financial operations,Guest Posting online business health, and verification of assets.
 
Your due diligence may also include, investigating the community where the business operates and customer demographics. In addition to business lawyers, financial professionals like CPAs together with valuation experts and business brokers can provide good assistance and guidance in determining the health of a business. 
Should I buy the company or just its assets For an existing business, you can buy the entity or some or all of its assets. Buying the entire business is accomplished by purchasing the ownership interest that is usually documented in a stock purchase agreement. Technically only corporations have stock, but LLC membership interests are often called stock in common parlance.
 
When you buy the stock, you get the whole business including its assets, liabilities, and even licenses. In my experience, stock purchase transactions have been commonly used in recent years with drug and alcohol rehabilitation centers. This structure lends itself well to these businesses because of the licenses that transfer to the purchaser.
 
In other situations, particularly where liability avoidance is the primary goal, it may make more sense to buy only the assets of an existing business. This is accomplished through an asset purchase agreement. In that transaction, it is important to specifically identify the assets being purchased and sold to avoid confusion. There may also be transfers for certain assets that may need to be documented such as a title transfer for a motor vehicle or deed to real estate. This further highlights the importance of due diligence to identify and value the assets.
 
In either a stock purchase or asset purchase transaction, it is the important to have experienced corporate counsel. Due diligence should also be done.  
Can I totally rely on the representations of the seller Purchasers are entitled to rely on certain representations of the seller. Florida law, however, has grown increasingly complex as to whether such reliance is justified and proper. Also, a significant factor is the degree to which any representation impacted the ability of a buyer to verify information.

Relying entirely on representations of the business without performing any independent verification may place the buyer in a precarious position later. The buyer may also incur substantial litigation expenses that might have avoided. 
 
Business purchasers who fail to conduct any pre-purchase investigation or due diligence essentially fail to plan and consequently have a plan to fail. Upon identifying a purchase opportunity a better initial approach is to retain qualified experts to help you in the due diligence process. A good business lawyer will identify the representations for you to focus on to avoid problems later.
How should I document my due diligence It is important from the beginning to maintain clear records. Recording any representations by the seller that induce the purchase are very important to document. What you need to know is that Florida law distinguishes between representations that are opinions from those that are material but are false or fraudulent.
 
In certain situations, you simply may not be able to uncover any deception through due diligence. The seller may just disguise the true facts too well. If it later becomes necessary to sue the seller over the representations, proper and thorough documentation from early in the process will greatly aid in presenting a full and complete picture to a judge or jury.  Your experienced business attorney can provide guidance on how to document those representations.
 
It is also equally important to clearly document the closing.  By so doing, the parties can have a clear understanding of the scope of the transfer. It also makes it easier to enforce any rights post-closing. Properly defining the assets of an asset purchase transaction closes avoids post-closing confusion and disputes. Having an experienced business lawyer at your side throughout the process increases the chance of a trouble-free transaction.  

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About Article Author

David Steinfeld
David Steinfeld

Written by David Steinfeld

David Steinfeld is one of the few Board Certified business law experts in Florida. He has been licensed for almost 25 years. He is AV-Preeminent rated, ranked as one of the Best Lawyers in America by U.S. News and World Report, and consistently named a Florida Super Lawyer and one of Florida’s Legal Elite. Dave has also received Martindale’s prestigious Judicial Edition Award for high reviews by Judges, its Platinum Client Champion Award and has a 10.0-Superb rating on AVVO as well as a 10.0 rating on Justia, lawyer reviews websites.

Check out business lawyer David Steinfeld online for helpful videos and articles on Florida business law, real estate disputes, and electronic discovery solutions for your business. This article is provided for informational purposes only.

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