Business Transactions and Finance
Weiss & Weiss is experienced in navigating the legal aspects involved in the purchase or sale of a business or a professional practice. Typical transactions in this practice group involve the purchase and sale of a business such as a restaurant, funeral home or pharmacy, or a professional practice such as a dental or medical office. In many cases, real estate is sold or financed as an ancillary aspect of the transaction. Our professional judgment may dictate that the transfer take the form of transferring an interest in an existing entity such as a limited liability company.
Business and professional practice purchases may involve compliance with licensing authorities in New York State and the filing of formation documents for entities such as corporations and limited liability companies. Our attorneys, at times in consultation with the client’s tax advisor, will determine the entity best suited to the transaction, form said entity and obtain a taxpayer identification number. If the purchase is of an existing entity, we will conduct a search to confirm that the entity is in good standing and has made all legally required filings in New York State and that taxes such as franchise taxes and business corporation taxes are paid. We are familiar with particular legal requirements, such as the requirement that a pharmacy must be owned by licensed pharmacist, rather than by a lay individual. Further, in order to form a professional corporation in New York State, the dentist, doctor or other professional involved must maintain a current professional license with the state.
We conduct due diligence on behalf of our purchasing clients, reviewing documents such as existing equipment leases, tenant leases, vendor contracts with service providers and filings made to confirm that our client is purchasing a fiscally sound investment and that any notice or consent of third parties is obtained. Our review will confirm that all personal property, such as furniture, expected by the purchaser is included in the contract of sale. We will determine if a bulk sale filing and tax payment is required to be made with the taxing authorities and coordinate such filing and payment as necessary to the transaction. We will also review the entity documents, such as the certificate of incorporation and amendments thereto with filing receipt, bylaws, stock certificate book and corporate seal, which documents we will require to be delivered at closing.
Should there be tenants at the property being purchased by the business, particular tasks will be completed such as review of tenant leases, acquisition of tenant estoppel letters and coordination of the delivery of subordination, non-disturbance and attornment agreements. Further, a litigation search will be conducted to evaluate whether the tenants at the property owned by the business are currently involved in litigation, whether litigation has occurred in the past and the nature of such litigation. Attention at the closing will be made to adjustments, so that security deposits held by the seller are delivered to the purchaser and rents are apportioned as to whether they are collected through the closing date from any particular tenant. Further, letters to the tenants will be signed by the seller at the closing instructing that rent be delivered to the purchaser after the closing and that the security deposit is being held by the purchaser.
We negotiate contracts on behalf of the parties to the transfer of a business or professional practice. The contracts prepared by Weiss & Weiss specify all property being transferred, including equipment such as furniture and motor vehicles. Our attorneys consult with our client’s accountant as may be necessary in order to allocate the purchase price to particular assets as beneficial from a tax perspective. We also commonly include non-compete clauses in contracts for the purchases of businesses and professional practices, so that the party selling the business or professional practice does not receive the proceeds of the purchase price and then establish a new business in the vicinity of the business or professional practice being sold. Non-compete clauses customarily limit the seller’s post-closing activities by period of time and by geographical area. When representing a party purchasing a business or professional practice, we require the seller to deliver client or vendor lists.
Business and professional practice transactions may be financed, whether through an institutional lender or privately financed. As may be necessary, we are prepared to coordinate the completion of the lender’s closing requirements or draft loan documents requested by a private lender. Promissory notes may be guaranteed by the principal of the purchaser. Our attorneys commonly draft such guaranty provisions. Should there be a default under the promissory note or other closing document, our attorneys are prepared to prosecute the necessary legal action.