A great deal of work goes into finding a small business to buy. Once you’ve found one, completed the due diligence process, negotiated the terms, and secured the capital you need for the purchase, you’ll need these ten items to make your deal official:
Item 1: Bill of sale.
Ask the seller to provide you with written documentation of your purchase. At a minimum, the bill of sale should include:
- Your name
- The terms of the sale
- The price you paid
- The date of its transfer to you
- The location where the sale took place
Item 2: Documentation of the agreed purchase price.
Attain a signed copy of the purchase agreement you sent to the seller. This purchase agreement should have been drafted by your attorney and signed by both you and the seller after you completed your final negotiations.
Item 3: A signed non-compete agreement.
Attain a signed non-compete agreement from the seller. This will help you ensure that the seller won’t try to open a competing business in the same market. Your attorney should have drafted a non-compete agreement for the seller in an earlier stage of the process and asked them to sign it after your negotiations.
Item 4: A signed employment agreement (if applicable).
Attain a signed employment or consultant agreement from the seller if you’ve arranged for that person to stay on after the sale as an employee or a paid consultant.
Item 5: Revised lease (if applicable).
Contact the landlord of the business site to put your name on the lease and retain a copy of the lease agreement for your records.
Item 6: Vehicle transfer paperwork (if applicable).
Visit your local bureau of motor vehicles to transfer the ownership of any vehicles being offered as part of the purchase.
Item 7: Paper verifications of the transfer of intellectual property (if applicable).
Work with your attorney to attain the forms you need to license the previous owner’s intellectual property or process an assignment of them. Assignments should ensure a permanent transfer of the rights.
Item 8: The documents you'll need to file with the franchisor to assume ownership of a franchise (if applicable).
If you’re purchasing a franchise, you’ll need to take an additional step. Connect with the master franchise organization and attain the paperwork you need to become a new owner. Ensure that the paperwork is signed by the seller and that the seller receives a copy of your completed forms.
Item 9: IRS Form 8594 (if applicable).
Complete a copy of Form 8594, Asset Acquisition Statement Under Section 1060 to document the assets you receive in the transfer and their value. Your attorney can walk you through this important step.
Item 10: Paperwork to be filed with local tax authorities that verified the transfer of business inventory.
Need help finding an attorney? Consider working with Contract Counsel. Check out their website here.
Item 11: Settlement statements, receivables, and payables reports.
The seller should prepare prorations based on payoff letters, balance sheets, and profit-and-loss statements. They should also offer an up-to-date record of the accounts receivable and payable you'll receive.
What else will occur?
You may need to work through other documents to complete your purchase. These could include:
- IRS Form 8594 to document the assets you receive in the transfer and their value.
- Paperwork to be filed with local tax authorities that verifies the transfer of business inventory
You'll also ensure that the seller transfers the business's utilities, phone lines, credit card machines, employment contracts, vendor contracts, and sales contracts to you (if applicable) and that you receive the locks and keys of your new business.
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