12 Legal Documents Needed in a Business Purchase – Part 3
Hopefully you have read our two prior blogs in this three-part series discussing the legal documents commonly used in purchasing or selling a business. Below is a brief description of the last six documents in our list:
- Deed. If the transaction involves the purchase of real property, ownership or title is transferred by a deed which must be recorded with the County Recorder of the county in which the land is located. The deed should be recorded as soon as possible following the close of the sale.
- Personal Guaranty. If the buyer is an entity and the full purchase price is not paid at closing, the seller will likely require a personal guaranty from each of the buyers. The guaranty is the owners’ agreement to be personally liable for the full amount due if the buyer defaults on the loan. In community property states the guaranty should be signed by both the buyer and the buyer’s spouse, even if the spouse is not a member or partner in the buyer’s business.
- Assignment of Lease. If the transaction involves the buyer acquiring the seller’s interest as a tenant under a lease, an Assignment of Lease is needed to transfer the seller’s rights and obligations under the lease to the buyer.
- Consent of Landlord to Assignment of Lease. If the lessor of a lease has the right to approve all transfers of the lease to another party, an Assignment of Lease requires the landlord’s consent.
- Covenant Not to Compete. A prudent purchaser of a business will require an agreement by the seller (and owners of the selling entity) that they will not compete with the business being purchased. Failure to obtain a non-compete agreement could result in the selling entity and its owners opening a competing business next door to the buyer’s business. The courts strictly construe Covenants Not to Compete, so it is essential to have an Arizona business attorney draft this document to fit the transaction.
- Consulting Agreement. If the buyer wants to obligate certain personnel employed by the seller, a Consulting Agreement should be used for independent contractors and an Employment Agreement for employees.
The above list is not exhaustive, so to learn more, contact us for an appointment. An experienced attorney at Nielsen Law Group is available to help with all your business matters. You can schedule your initial consultation by calling (480) 888-7111 or submitting a web request here.