Legal-Ease: Structuring a small-business purchase

Lee R. Schroeder is an Ohio licensed attorney with Schroeder Law LLC in Ottawa. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at [email protected] or at (419) 523-5523. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.

Typically, there are two ways small businesses are bought and sold. A “sale of entity” is when the whole business is sold together, while a “sale of the assets” is when the owner sells all the components of the business without including the overall entity or its liabilities.

A sale of entity is typically used by family members or people who already owned some portion of the business and are buying the rest. It’s considered the lesser of the two options, because the buyer is assuming all liabilities of the business. A sale of assets is often considered a better business decision, because the buyer receives all the components of the business without its liabilities.

People buy and sell small businesses every day. Those business sales/purchases are typically structured in one of two ways, and that sale structure dramatically affects the business buyer’s opportunities and liabilities in the future.

Traditionally, each business was sold altogether as a single unit. This structure for the sale of a business is typically called the “sale of the entity.” If a business is analogized to be a box full of assets that together creates money, the sale of the entity is the sale of the box and all of the box’s contents.

Read Lee’s full article on buying a small business in the Lima News here: Legal-Ease: Structuring a small-business purchase

Source: LimaOhio.com, Legal-Ease: Structuring a small-business purchase by Lee R. Schroeder, August 23, 2014

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