Do I Need a Lawyer to Help Buy A Business?

Do I Need a Lawyer to Help Buy A Business?

Business Sale, Contracts, Letter of Intent, Sale of Business
Months ago, I was asked by some LLC members to review and make changes to their company's operating agreement. They also told me they were "in the process" of buying an established local company from its owner and that they might want my firm's help on that "later". I did not press this last part since, as a Phoenix business lawyer, I see a lot of folks claim to be "in the process" of a lot of things. Instead, I focused on the job they had asked me to do and let them know that I would be there to assist further if they needed guidance or further representation. Sure enough, several months later, these same clients later asked me to evaluate some stock purchase documents drafted by the seller's…
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What Happens to Business Bank Accounts in a Stock Purchase?

What Happens to Business Bank Accounts in a Stock Purchase?

Business Sale, Sale of Business, Stock Purchase
Note:  This post is an update to one of our blog's more popular posts of the past few years, in what we called the "M&Ailbag". Question:   I'm thinking about purchasing all of the stock of a small business and the bank account that was opened by the company's previous CEO (who is leaving).  Would the seller need to close that account and I open a new one?  I am thinking that I just get added to the existing account as a signor and, when the amendments are returned from the corporation commission, they would be taken to the bank to have the exiting signor removed?  The two (main) ways to buy an existing business Before answering this question, it is helpful to understand the two primary ways you can buy…
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Who Pays The Professional Fees in Sale of an Arizona Business?

Who Pays The Professional Fees in Sale of an Arizona Business?

Business Sale, Contracts, Sale of Business
As a Phoenix corporate and business lawyer, every so often I'm asked by clients new to the process of buying a business or selling a business which side will pay for the professional fees for the attorney, accountant, appraiser, and other services that are often essential to the transaction. The Attorney response every client hates These clients are usually disappointed when I give them that most lawyerly of all answers:  "It depends."  This is because there is no set rule or law that requires one party to a business sale or merger or the other to pay for the lawyer or accounting fees.  As with the terms of most private, business-to-business agreements, things are pretty free form and up to the contracting parties themselves to decide. However, in my experience…
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So You Want to Invest in Your Friend’s Business (Part Two)

So You Want to Invest in Your Friend’s Business (Part Two)

Business Formation, Contracts, Limited Liability Company, Operating Agreement, Sale of Business
In Part One, I talked about some of the more important questions overlooked (or usually glossed over) by people looking to invest in a friend's existing business. In this part, I'll delve into some of the key documents used to formalize the purchase of an interest in a business, what they are for and why they are important. For purposes of this article, we are going to assume that the business being invested in is formed and operated as a Limited Liability Company (LLC), although the concepts here are applicable to a corporation or partnership, too: Operating Agreement -  As I touched on in Part One, this is a document that hopefully already exists. You should insist upon a complete copy of the version executed by your friend and his…
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So You Want to Invest in Your Friend’s Business (Part One)

So You Want to Invest in Your Friend’s Business (Part One)

Business Formation, Corporations, Limited Liability Company, Operating Agreement, Sale of Business
At least once a week I get contacted by someone who is looking to "invest in a friend's business".  The call or e-mail usually goes something along these lines: "I want to invest in my friend's business" "My friend actually owns X% of the business with other partners" "I will be purchasing [some amount]% of my friend's X%" "It's not a large amount of money, just $[insert dollar amount that is usually a large amount of money to most people]" "I want to be protected" Because this is a question that comes up frequently enough, I figured I would give my faithful readers a freebie and highlight some of the main (but by no means only) issues that come with sinking your money into a friend's company, hopefully helping avoid…
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