How does a bootstrapped small business go about purchasing another small business?

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How does a bootstrapped small business go about purchasing another small business?

We are a small business, looking to purchase another small business. We have no

idea where to start, and don’t have the money for expensive legal fees. Do you

have any advice on steps we should take to save money, as well as how we should

go about creating the business sale contract in a way that’s cost effective and

yet safe?

Asked on February 22, 2017 under Business Law, Massachusetts

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

The contract of sale can be very simple: it can simply state what you are buying (e.g. the LLC or corporation, possibly, if it is one; or just the "assets," such as inventory, customer lists, intellectual property, name, etc. if it's a sole proprietorship, or if it's an LLC/corporation and you don't want the business structure itself--just what it owns), the price being paid, how it's being paid and when, and the effective date of the sale. When you get down to it, that's all a contract of sale must address. You can simply list all the terms, then once you know what you're buying, when, and how, write up an agreement stating you are buying those things in exchange for a certain payment, paid a certain way.
Getting a level more sophisticated, you will also want to consider if you want to take over any of the other business's contracts (like office or equipment leases) and, if so, put that in the agreement. You may wish to include a non-competition clause, so the owner can't start competing with you right way (e.g. maybe he can't compete for 2 years, say). You could also include that he'd need to provide a certain amount (e.g. 20 hours?) of "consulting" to you  over the first 6 months, to answer questions you have.
But it all comes down to decide what you want, come to an agreement about it with the other side, then right it up in plain language (don't worry about making it sound "legal"). 
You can almost certainly, if you "google," find some sample or template contract, or someone else's contract which has been posted online for one reason or another, and use that as a model or base, just modifying it to your needs.


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