Letter of Intent

In the process of structuring a deal we start with the use of a non-binding letter of intent (an "LOI", or sometimes referred to as a "terms sheet"). The letter of intent is an inexpensive way to clarity expectations in writing and signed by both parties. It should show all of the key points of the deal and thereby avoid expensive and protracted negotiations over formal purchase and sale documents that might totally miss the point on some very contentious and costly elements of the proposed deal. 

Once clarified to everyone's satisfaction, we have a 90% chance that the deal will come together. Attorneys who neglect this crucial step can waste thousands of dollars in legal fees, not to mention CPA fees and other expert consultants, and risk the closing of the sale.

Non-Competes

The seller's post-closing non-compete is also a very delicate part of the mix, since it must be "reasonable" in all respects in order to be enforceable -- but there are no clear guidelines of what that standard actually means under each unique set of facts and circumstances.  For a selling owner, five or seven years or more may be very reasonable in your situation, and totally enforceable in most states.  Failure to address this issue adequately, may result in the seller getting back into the industry shortly, using the buyer's own money from the sale to try and put the buyer out of business.

Tax Considerations

Non-Disclosure Agreements

Business Structure

Whether the business is a Subchapter "S" type corporation or not, for example, can dictate whether (i) the corporation itself can most appropriately sell substantially all of its assets to the buyer; or (ii) whether the buyer should instead purchase all of the stock of the corporation and thereby acquire not only the assets but also effectively assume the liabilities of the corporation, know and unknown.  The buyer's attorney and CPA will generally push hard for an asset sale in order to thereby leave behind unknown liabilities of various kinds for all practical purposes; but careful planning can often reduce those risks for the buyer substantially and actually end up with a stock sale structuring of the deal that gives the seller much more after-tax money left in hand over the years following closing.

Under certain circumstances it's possible for the owner of a "C" corporation facing double taxation in an asset sale scenario, to sell separately all of the stock of the corporation, accompanied by a concurrent separate sale of his or her "personal goodwill"; thereby saving potentially a huge amount of taxes.  This can be a risky area, but properly structured by accomplished tax advisors can net tens and tens of thousands of additional after-tax dollars for the seller under the right fact pattern.