Takeover contract?

[lh0628]

I'm trying to write out a contract for a small clothing shop my partener and I are taking over.

I'm not famailar with the format, legal terms, etc. Do you have any site that has sample contracts for small business buyouts?

Cheers.

[lh0628]

anybody:confused:

[ullyeus]

a contract for......

what exactly?

[wheel]

You won't want a template for this. You need to specify exactly what is being bought, (inventory, furnishings, takeover lease, on and on) for how much, from whom, on what dates, and so on. For this, you must have a lawyer.

[lh0628]

Ok. So if I can list everything out then would I still need a lawyer? It's just seems redicoulus that I need to pay $1000 for someone to write a piece of contract.

[lh0628]

a contract for......

what exactly?

It's for taking over a clothing shop business.

[wheel]

Well, whatever you feel is best. I've sold two businesses in the six figure area and both times the purchaser (that's you) had their lawyer draw up a contract. Then I paid my lawyer to review it.

I do informal agreements all the time. But buying a business isn't one of those times. There's too much that the layperson simply doesn't know about that can spring up and bite you. Do you have a non-compete? Do you own the clients or can they contact them again later? How long for the non-compete? Is the business free and clear of debts and obligations? What about potential lawsuits they may have incurred that haven't actually been filed yet? and so on and so on. Have something like that spring up 3 months after you buy the business and the lawyer's fees will start to seem like a deal.

And, if you were real smart, you'd have an accountant review the agreement beforehand as well. Are you paying GST on the sale? Are you paying it out over a year or two (fairly typical)? Are there some tax dates that would be better for you?

To put it a bit less politely, you're going to be a fool if you don't have a lawyer draw this up.

[grant]

a contract for......

what exactly?
If i recall correctly he's buying a corporation that operates a clothing store.

You definitely need a lawyer to remember all the details that otherwise seem obvious AFTER the fact. Stuff like:

- ensuring assets aren't removed from the corporation between your inspection & the sale date
- adjusting out short-term assets & liabilities
- holding a deposit in escrow
- what happens if catastrophe hits between the agreement date & sale date

etc.

[lh0628]

Thank you for the replies guys. I'm buying a clothing store for low 5 figures.

Here's what we are going to do:
1. we need a contract for purchase of shares from the current shareholders.
(3 of us, 2 of them). This is what I was asking about. I was thinking that
we can write out a contract that basically says
-'we' are to buy the shares of 'your company' which makes us the
new owners.
-and have a clause in contract that says 'you' are still responsible for
any debts and liabilites that occurred prior to the purchase date, but
free of any responsibility afterwards.
2. we file to the provincial department of finance for a 'change of directors'

So essentially we are just doing a change of directors. I guess I wasn't stating my question right. Is this something that would require a lawyer as well?

-There aren't much assets and inventories (cash register, interior decoration, some clothes, and that's about it).
-I don't know with just 'change of directors' if GST #, business # etc stay the same, I'm going to phone CRA and find out.
-We had a one-hour consultation with an accountant already, it was very informative.
-the current owner is moving out of country and we are just a local shop, so perhaps we don't need a non-compete clause in the contract.

I appologize if this sounds confusing, but again thanks for the help.

cheers.

[grant]

yes it seems simple, in fact it probably won't get much simpler than what you've described, but you still need a lawyer if you want to cover everything.

If you opt not to use a lawyer (which may be fine if you're willing to take the risk, odds are good everything will go smoothly) then you can just write up a contract to include whatever details you happen to think are relevant.

In my last intent to purchase letters included 2 clauses that basically said:

"Corporation shall include exactly the long term liabilities & assets as per the balance sheet dated x date".

This prevents the seller from getting some huge loan, stealing the money, and sticking you with the debt. Or from selling all the fixtures and taking the cash.

"purchase price will be adjusted to credit for short term assets and liabilities as of sale date."

this means the seller gets all the risks & rewards from operating the business up until the handover date. The seller pays you for all the bills outstanding, and you pay them for all the unsold inventory & cash remaining in the corp.

[grant]

btw the business & GST #s stay the same. A corporation is a seperate legal entity.

[lh0628]

Got it, thanks very much for all your help.

[lh0628]

Sorry guys one more question.

If we don't get a lawyer involved and write out the purchase agreement ourselves, is it legal binding just as prepared by a lawyer?