These are some of the issues related to this subject. As is the case with all material at this site, you should not consider this legal advice. This is intended only as an example of some of the many serious general issues to consider with such a matter. Expert local legal, financial advice should be obtained in all such matters.

    The following is an abbreviated outline of many of the issues a seller should investigate before agreeing to purchase a business. This is an outline only and is not intended to be inclusive of all possible issues. Almost all business purchases will include substantially more detailed information. Many transactions will have very particularized concerns which must be investigated, such as environmental liability. Some of the more common major areas are:

• Letter of intent. Is such a document advisable before even a contract is drawn up?

• Confidentiality covenants. Are agreements necessary to prevent unauthorized disclosure of sensitive information or even the existence of the negotiations themselves (ex. for reasons of employee, competitor or creditor panic ).

• Lock up agreement. Is it possible to obtain a commitment that the other side will agree not to negotiate or advertise the potential sale to any other party during negotiations with this potential purchaser?

• Access to books. There must be full disclosure of all records of seller's business.

• Access to facilities. There must be full and timely access to all assets and premises involved directly or indirectly in the transaction.

• Authority of seller. Verify the legal authority of the seller or seller's agent to negotiate and transfer clear title to the business assets.

• Employment matters. Determine existence and status of all employment, collective bargaining, non-competition, incentive, deferred compensation and pension plans of any type, as well as medical insurance plans, disability plans, withholding liability, Social Security, State and local tax liability, unemployment pool liability, workers compensation claims (filed and potential), etc.

• Environmental. Permits for operation of all facilities and equipment; discharge and waste management operations and permits and contracts. Review all permits, licenses and compliance plans and determine successor liability and transfer procedure. Review any enforcement actions or issues. Real estate, construction and storage issues are not covered in this outline.

• Financial statements. Prior five years statements. Conference with auditors.

• Insurance. Get copies of all policies. Discuss with agent regarding sufficiency during negotiations and after sale. Investigate need for any type of tail insurance.

• Inventory. Distinguish demos, consignments and secured or financed inventory. Determine if any customers have and will account for inventory in their possession.

• Litigation. Review all records of claims made or actions filed as well as possible judgments, consent agreements, etc. (ex. EEOC, FDA, FTC, etc).

• Loans to or from company. Review documentation and trace assets and obligations.

• Contracts. Review all pending or proposed contracts for binding effect to or from successor, assignability, etc.

• Good standing with State. Check with all appropriate government agencies re: status of seller and potential liens or claims against seller.

• Property. Check title to land, equipment, leases, liens, and agreements

• Zoning. Make sure all proposed and current activities can continue at important locations.