How to Purchase an LLC in Florida Without It Ending in Disaster

How to Purchase an LLC in Florida Without It Ending in Disaster

Buying an LLC, like any other major purchase, deserves extra care and attention. You don’t want to be tricked into paying too much or left with a lemon of a business, after all! The steps below can do a lot to mitigate the chance of buyer’s remorse, however, so read on.

Find a Business

The first step in buying an LLC is a pretty obvious one – you’ll have to find a business for sale. But where can you find out what’s available? After all, it isn’t like you can hop onto eBay and search for owners looking to sell off their assets. Your best bet is to try networking with your local chamber of commerce as well as other leaders in your field or industry. Trade publications and some specialist websites can also provide solid leads.

Maybe you want to start your own LLC instead of buying one that’s already set up but don’t know where to start. We have a guide on LLC formation that can help you with that.

Start Your Negotiations

Next comes the negotiation process. Double-check that you are negotiating with someone authorized to speak on the business’s behalf. The goal here is to gather information – you don’t need to concern yourself with scoring the perfect deal just yet. At this stage you will want to obtain permission from the owner to access and review the business’s books and records. This is so that you can better understand its real value. Don’t be surprised if the owner asks you to provide a financial statement to verify that you have the necessary capital for purchase. They might also ask you to sign a confidentiality agreement, but this isn’t out of the ordinary either.

Do Your Homework

When deciding to buy an LLC, take the time to do your research. This is a major transaction that will shape your life for years to come and you will want to get it right. If you try and rush things or get away with the bare minimum, then disaster is sure to follow.

At this stage you’re trying to learn as much as possible about the state of the company. Examine both its assets and its finances. Consider whether the company has any debts, mortgages, loans, or leases that you might become responsible for. You also need to examine its revenues, expenses, and whether or not the operation is bringing in a profit.

There are plenty of documents to help you with this search. Accounting ledgers, tax returns, and vendor agreements can give you a good idea of their financial history. Official agreements, like the LLC’s articles of organization and operating agreement, are especially useful for managing the business. If you’re having a hard time finding what you need, then consider combing through public records for any liens, mortgages, or property tax obligations.

The Term Sheet/Memorandum of Understanding

Once you have a good idea of what you’re getting yourself into, it’s time to start hammering out the specifics with the other party. First, you need to decide if you want to buy the LLC in its entirety or if you are only interested in specific assets. Next, the both of you will start working on what is known as either a term sheet or a memorandum of understanding, which is a document that describes the basic elements of the deal, such as what should be included in the purchase as well as any tentative plans for price and payment terms.

The Purchase Agreement and Other Documents

Once you’ve done your research and agreed on the terms of the deal with the other party, you will then need to memorialize the transaction in what is known as a “purchase agreement.” This agreement is a formal legal document that finalizes the purchase price and sets up contingency plans should problems arise. It will need to be signed by both buyer and seller to be valid.

Other agreements could also come in handy depending on the situation. Consult with a business lawyer to make sure you have everything you need.

Notifications

In cases where the entire LLC is being purchased instead of individual assets, you should notify the State of Florida that the LLC’s ownership has changed. You will also need to provide the name and address of your registered agent, assuming that you aren’t using the agent included in the LLC’s articles of organization. Most of this can be done through the Division of Corporation’s website. Tax authorities and any relevant licensing agencies should be informed, too.

Looking to start a business or grow your current business? Contact FL Patel Law today by visiting our website or calling 727-279-5037.