Buying a Business | Professional Legal Guidance for Acquisitions

Purchasing a business is a significant milestone, full of opportunity and potential risk. At SK Legal, we understand that every business acquisition is unique, and our goal is to help you navigate the legal complexities to ensure a smooth transaction. Whether you’re buying a business for the first time or expanding your portfolio, our experienced team is here to assist you at every stage of the process.

Whether you’re acquiring a small local business or a larger corporate entity, our team of skilled lawyers ensures that your investment is safeguarded, offering support from the initial evaluation through to finalizing the purchase.

Choosing the Right Business to Buy

The first step in purchasing a business is determining what type of business aligns with your interests and goals. While this decision is personal, we recommend selecting a business you’re passionate about, which will help you remain committed through the challenges of ownership.

Acquiring a business is one of the most significant decisions you’ll make, and it’s important to have the right legal team at your side. SK Legal provides comprehensive legal services for those looking to buy a business, ensuring that our clients understand the risks, protect their assets, and avoid any potential legal pitfalls.

Valuing the Business

Once you’ve identified a business, the next step is to determine its value. This involves assessing the following key factors:

  • The amount you can afford
  • Additional costs like inventory or equipment
  • Exactly what you’re getting in the sale
  • Any hidden costs associated with the purchase

An accountant or business valuation specialist can provide valuable insight during this stage, while SK Legal ensures the transaction structure and legal agreements are sound.

Financing Options

When buying a business, there are several ways to finance the acquisition:

  • Vendor Financing: The seller provides a loan for part of the purchase price.
  • Lender Financing: A bank or lending institution offers a loan.
  • Combination Financing: A mix of vendor and lender financing, allowing you to leverage both options.

Alternatively, there are some Canadian government programs to help people buy their new small businesses.

At SK Legal, we guide you through these options and help draft clear agreements, protecting your interests in every scenario.

Asset vs. Share Purchase

One of the most critical decisions when buying a business is whether to make an asset purchase or a share purchase. Each option carries different legal and tax implications:

  • Asset Purchase: You buy specific assets, leaving the liabilities with the seller.
  • Share Purchase: You acquire the company as a whole, including both assets and liabilities.

Our legal team will explain the pros and cons of each approach, ensuring that you make an informed decision tailored to your business needs.

Key Considerations When Buying a Business

When purchasing a business, there are several critical factors to take into account to ensure a successful transaction. These considerations will help you avoid potential pitfalls and make an informed decision:

  1. Business Valuation: Understanding how much the business is worth is crucial. A thorough valuation will take into account the company’s assets, liabilities, cash flow, and future growth potential. Hiring a professional appraiser or accountant to assist with this step is highly recommended.
  2. Legal Structure: You will need to decide whether you are purchasing the assets of the business or the shares of the company. Each approach has legal and tax implications, and the decision will depend on the specific circumstances of the transaction.
  3. Due Diligence: Conducting thorough due diligence is essential to uncover any potential issues with the business. This includes reviewing financial statements, existing contracts, intellectual property rights, pending lawsuits, and employee agreements. SK Legal provides support during this process, ensuring all legal risks are identified.
  4. Existing Liabilities: Be aware of any outstanding debts, pending litigation, or tax liabilities that may transfer with the business. Whether it’s through an asset or share purchase, understanding what liabilities you may inherit is key to protecting yourself.
  5. Financing the Purchase: Whether through vendor financing, a loan, or a combination of both, securing the necessary financing is a critical part of the buying process. SK Legal assists in drafting agreements that clearly outline the terms of financing to ensure the transaction goes smoothly.
  6. Contracts and Agreements: When buying a business, contracts such as leases, supplier agreements, and employee contracts may need to be transferred or renegotiated. Our team at SK Legal ensures these agreements are properly handled, avoiding potential disruptions post-purchase.
  7. Transition and Integration: Planning for a smooth transition is important, particularly when it comes to retaining key employees and maintaining business operations. At SK Legal, we help you draft transition agreements and employment contracts that ensure continuity.

Drafting a Purchase Agreement

Once the key terms of the acquisition are in place, the next step is to draft the purchase agreement. This document outlines the terms and conditions of the sale, including the purchase price, financing arrangements, and any warranties or indemnities. It is essential that this agreement is carefully drafted to protect your interests.

SK Legal ensures that your purchase agreement is comprehensive and legally sound, tailored to your specific situation, and aligned with your business goals.

buying a business

Do I Need a Lawyer to Buy a Business?

While it’s not legally required to hire a lawyer when buying a business, it is highly recommended. A lawyer ensures that your purchase agreement is legally binding, helps you conduct due diligence, and protects you from potential legal issues post-purchase

What is Due Diligence in Business Acquisitions?

Due diligence is the process of thoroughly investigating the business before completing the purchase. It includes reviewing financial statements, contracts, intellectual property, and any outstanding liabilities. It is a critical step in avoiding hidden risks.

Should I Buy the Assets or Shares of a Business?

Whether to buy assets or shares depends on your risk tolerance and the specific business you are acquiring. Asset purchases typically minimize risk, as you can choose which liabilities to assume. Share purchases, on the other hand, offer continuity but come with higher risk.

How Can I Finance the Purchase of a Business?

You can finance the purchase through a combination of vendor financing (where the seller allows you to pay over time) and lender financing (through a loan from a bank or other financial institution). A combination of both is also common.

What Role Does a Lawyer Play After the Purchase?

Your lawyer’s involvement doesn’t end with the purchase. SK Legal continues to support you by assisting with corporate structuring, contract negotiations, and any legal issues that may arise as you integrate your new business.

Franchise and Trademark Lawyers in Grande Prairie
Sam Khajeei / BA /JD