Spiro Verras represents buyers and sellers of closely held businesses: a practice sold to an associate, a company sold to a competitor or an employee, a family business passed to the next generation for a price. The work runs from the letter of intent through the closing. He has practiced since 1993, drafts every agreement himself, and has represented buyers and sellers. This page describes the decisions along the way and the ones that belong to your CPA rather than to him.
The first decision is what is being sold
In an asset sale, the buyer uses its own entity and buys a list of things: equipment, inventory, the name, the customer list, the goodwill, the contracts that can be assigned, and the lease if the landlord consents. The buyer takes on only the liabilities it agrees to take. The seller keeps the old entity, pays its remaining debts, and winds it up. In a sale of stock or membership interests, the buyer takes the entity whole, with its contracts, licenses, employees, history, and every liability, known or not. Buyers prefer assets. Sellers prefer to sell the entity. The tax treatment of the two differs sharply, and how the price is allocated among the assets is the most important tax question in the deal. Both belong to your CPA, who should be at the table before the letter of intent is signed.
One Florida point applies either way: The buyer of a business can be held liable for the seller’s unpaid sales tax, so a buyer should insist on a tax clearance from the Department of Revenue or a holdback until it arrives.
The letter of intent sets the terms everything else follows
A letter of intent is usually non-binding on price and structure and binding on confidentiality, a period of exclusivity, and who pays for what. Spiro Verras would rather spend a few hours on the letter, because once the price, the structure, the non-competition term, and the seller financing are in it, they are hard to move.
Due diligence is where the buyer learns what it is buying
The buyer reviews several years of financial statements and tax returns, every contract and lease, licenses and permits, the employee roster, pending claims, and the condition and title of the assets. Searches for recorded liens, judgments, and tax liens show who already has a claim on what is being sold. A seller does its own diligence on the buyer’s ability to pay. Much of this a client can gather without a lawyer, and Spiro Verras will say which parts.
The purchase agreement allocates the risk
The agreement states the price and how it is paid, and what is included and excluded. Its heart is the representations and warranties, in which the seller states what is true about the business, and the indemnification provisions, which say what happens if a statement proves false, usually with a deductible, a cap, and a time limit, and often with part of the price held in escrow. A non-competition covenant protects what the buyer paid for; Florida enforces a reasonable covenant given by the seller of a business and presumes a term of three years or less reasonable. Confidentiality, non-solicitation, a transition period, and any continued employment of the seller round it out.
A seller who finances the price is a lender
Most sales of small businesses involve some seller financing. The seller takes a promissory note for part of the price and should be secured like any lender: a security agreement in the assets sold, a financing statement filed with the Florida Secured Transaction Registry, a personal guarantee from the buyer’s principal, and a pledge of the purchased stock or membership interests so that a default returns the business to the seller. If a bank is also lending, it will require the seller to subordinate. A seller who carries an unsecured note has sold the business and lent the money with nothing behind it.
Closing is a stack of documents and a funds flow
At closing the parties sign the bill of sale, the assignments of contracts and the lease, the stock powers or assignment of membership interests, the resolutions authorizing the sale, the note and security documents, and the non-competition agreement. Liens are paid from the proceeds, the fictitious name is transferred, the Division of Corporations filings are updated, and the money moves. Spiro Verras prepares the closing checklist early, because the item that delays a closing is usually one nobody thought of until the week before. When the closing is done, you will have the business or the price, a complete set of signed documents, and no loose end that surfaces the week after.
Spiro Verras handles the agreements and the closing, not the dispute afterward
If a representation proves false and the parties cannot resolve it, that is litigation, and Verras Law does not litigate. The agreements are written to make that outcome less likely and less expensive. The work is billed hourly, with an estimate at the outset and an explanation of what would change it. On a small sale the legal work is a noticeable share of the price, and Spiro Verras will tell you where it can be trimmed and where it should not be. The limited liability companies page explains the entity a buyer usually forms to receive the assets, and Spiro Verras’s business practice has its own page.
The next step is the questionnaire, followed by an hour with Spiro Verras in Palm Harbor, or by appointment in Tampa or St. Petersburg.