Closing on a Business

Legal counsel is advised for this final step in purchasing a business to review all the documentation regarding the transfer of the company. The specific process of closing is comprised of the following:

  • Adjusted Purchase Price This will include rent, utilities, and inventory until the business closes.
  • Review Required Documents Including a corporate resolution approving the sale, evidence that the corporation is in good standing, or any tax releases that may have been promised by the seller. For more information, go to your local department of corporations or Secretary of State.
  • Signing Promissory Note The seller may sometimes have back financing, so have an attorney review any and all note documentation provided.
  • Security Agreements Lists the assets used for security purposes as a promise for repayment on the loan.
  • UCC Financing Statements Uniform Commercial Code documents are recorded with the Secretary of State in the state you will be purchasing your business.
  • Lease: Make sure that you have the landlord's concurrence if you agree to take over the lease.  If you are negotiating a new lease with the landlord, make sure both parties are in agreement of the terms of the new lease.
  • Vehicles: If the purchase of the business includes vehicles, you may have to complete transfer documents for the vehicles. Check with your local Department of Motor Vehicles to determine the correct procedure and necessary forms.
  • Bill of Sale: Proves the sale of the business. It also explicitly transfers ownership of tangible business assets not specifically transferred on their own.
  • Patents, Trademarks, and Copyrights: If there are any patents, trademarks and/or copyrights associated with the business, you may need to complete the necessary forms as part of the transaction.
  • Franchise: If the business is a franchise, you may need to complete franchise documents. Visit the Consumer Guide to Buying a Franchise for more information.
  • Closing or Settlement Sheet The closing or settlement sheet will list all financial aspects of the transaction. Everything listed on the settlement should have been negotiated prior to the closing.
  • Covenant Not to Compete It is a good idea to have the seller sign an agreement to not compete against the business. This will help prevent any interference from the previous owner.
  • Consultation/Employment Agreement: A necessary process for legal purposes if the seller is agreeing to remain on for a specified amount of time.
  • Complete IRS Form 8594 Asset Acquisition Statement This document will indicate how the purchase was allocated and a number of assets, which are important for your tax return.
  • Bulk Sale Laws: Make sure that your business complies with bulk sale laws, which govern the sale of business inventory.