Congratulations! You’ve reached a point in your life where only a very few can claim to have traveled! You can either sell the business you’ve worked so hard to grow, or you have the financial means or wherewithal to acquire someone’s business.

Are you selling a business? If so, there are many issues you need to work through, to make sure you sell your business properly. The two biggest issues are (1) getting paid and (2) actually walking away once the deal closes (i.e. not getting sucked into future lawsuits or liability issues). This takes careful planning and the proper purchase agreements and/or promissory notes to pull off effectively. If your buyer needs special payment arrangements (i.e. intends on paying with proceeds from the business over time), you need to carefully think through the scenarios and potential problems, and make sure they are addressed. If payment stops, you need to make sure you have effective mechanisms to collect or repossess the business, and that there is a business (and assets) to actually repossess.

Are you buying a business? If so, you have much risk to sort through. Aside from conducting the proper due diligence, to need to make sure you’ve properly accounted for all the assets and liabilities, making sure that existing assets actually transfer with the sale and are unencumbered (i.e. don’t suffer from liens, mortgages, promises, UCC filings, etc.) and that you are properly protected from those liabilities you don’t wish to assume and those liabilities you may be unaware of (i.e. potential lawsuits, notes, unknown accounts payable, etc.). Furthermore, don’t assume you can simply step into the business and it keeps working like clockwork. You need to renegotiate with any landlords and vendor lines-of-credit. You need to properly assume important contracts, and repudiate those you don’t want.

Buy Or Sell A Business Today

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Why L4SB?

  • Real Attorneys, not Scriveners
  • Significant Experience with Complex Business Transactions
  • Exclusively Focused on the Needs of Business
  • Flexible Hours, and Willing to Burn the Midnight Oil to Get the Job Done

Common Questions About Sales and Acquisitions of a Business:

What sorts of documents are needed to sell or buy a business?

This is a hard question to answer, as it really depends on the terms of the deal. At a minimum, you need a Purchase Agreement and Bill of Sale. There are generally two types of purchase agreements: Asset Purchase Agreements and Share or Membership Purchase Agreement, depending on whether just the assets are being purchased, or whether ownership in the actual corporate entity is being purchased. There are pros and cons to both types of transactions.
If the price of the business will be paid over time, another document needed is a promissory note. If there are assets in the business to be used as a security interest, you may also need a UCC-1 filing to perfect that security interest. If there are titled assets, you may need separate and individual bills of sale or title transfer documents. Finally, if there are assumable contracts (i.e. the lease, mortgages, lines of credit, etc.), then you will need separate documents for those, as well. There are other documents that may be needed, depending on the circumstances of the sale, type of business, etc.

What’s the difference between an asset purchase and ownership purchase?

When the shares or membership interest in a company is purchased, all assets and liabilities transfer with that purchase — ownership in the company is being purchased, not the individual assets. This is beneficial when the company itself has significant credit or assets or unassumable contracts.
An asset purchase, in contrast, is used when a purchaser only desires all or some portion of the assets, and not the company’s liabilities. This is the most popular form of business transaction, although most people don’t realize that not doing this right can lead to what’s called “successor liability,” where the successor in interest in substantially all the assets are still liable for some cause of action, liability or debt of the previous company.

What is ‘successor liability’ as it relates to an asset purchase?

The general rule is that a successor entity is not liable for the acts (or debts) of its predecessor, unless the elements of certain exceptions have been met. In most states, including New Mexico, Nevada and Illinois, there are four customary exceptions to the general rule: (1) Where the purchaser expressly or impliedly agrees to assume such debts or liability, (2) Where the transaction is really a consolidation or merger, (3) When the purchasing corporation is merely a continuation of the selling corporation, and (4) Where the transaction was fraudulently made in order to escape liability or debts.

The “de facto merger exception” is what usually snags most purchasers in an asset sale. This exception states the purchaser can be held to liabilities or debts as though they formed a merger, even if they didn’t meet (or follow) the statutory requirements. There is a four-factor test: (1) Whether there is a continuation of the enterprise, (2) Whether there is a continuity of shareholders, (3) Whether the selling company ceased its ordinary business operations, and (4) Whether the purchasing company assumed the seller’s obligations. All factors are weight equally, and a de facto merger will not exist when only two of the four factors exist.
Usually, an asset sale triggers two or more of the four-factor test. When that happens, it’s critical the purchase agreement contain proper representations and warranties, and that the purchaser protect him or herself with indemnity clauses.

The Law 4 Small Business Difference


We take client satisfaction seriously. We are not in the business of up-selling or pushing services that won’t help you. We work as your partner to get the job you expect done.


L4SB is your long-term partner to help you and your business with the inevitable ups-and-downs, and everything in between.


We’re business lawyers, and we understand many small- and medium-sized businesses struggle just to meet payroll, let alone pay for legal services. That’s why we offer a range of flat-rate services, and reasonable hourly rates for everything else.


With over 200 years of combined business law experience, you can count on getting sound advice and solid representation.

Buy Or Sell A Business Today

Whether buying or selling a business, you need competent representation to do things right

Contact Us Today