How can I protect myself if I’m thinking of buying a small auto repair business that I found for sale on a business broker website?
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How can I protect myself if I’m thinking of buying a small auto repair business that I found for sale on a business broker website?
Asked on July 5, 2015 under Business Law, New York
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 8 years ago | Contributor
1) Do good due diligence before agreeing to buy: e.g. make them provide and you review audited financials and tax returns; visit their location and physically inspect it; get permisssion to talk to some customers; check to make sure there are no lawsuits, liens, or judgments against them, or liens on important/expensive equipment. (A lawyer can help you check for these things.) Make sure they are registered to do business and check to see BBB complaints against them. "Google" them and check the different websites, national or local, that review or recommend businesses.
2) When you buy them, buy the assets, not the corporation or LLC (a lawyer will know how to do this), which will help you avoid any liabilities they incurred.
3) In the contract of sale, have them represent (promise) there are no liabilities or debts against them--and that if there are, and such are asserted against you, that they will indemnify (reimburse) you for all costs, etc.
4) Don't pay them everything up front: they should get part immediately, part later (maybe in a year)--that way, if it turns out they lied or committed fraud in some way (e.g. "cooked the books" to lie about the financials), you're holding some of the money still, which means you have a ready-to-hand source for repayment.
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