What Small Business Buyers Need to Know Before Closing
Buying a business can be exciting opportunity. You’re stepping into a company with customers, revenue, and operations already in place. But without proper due diligence, a seemingly smart investment can become a costly mistake.
Due diligence involves reviewing a business before purchase to uncover hidden liabilities, confirm licenses and permits, and evaluate contracts or agreements that could affect operations.
In Florida, buying a business is more than agreeing on a price and signing a contract. Hidden liabilities, regulatory issues, [] can turn a promising deal into an expensive problem. Below are some key areas every buyer should review during due diligence.
Trademarks and Brand Protection
Trademarks are a critical part of a business’s identity. They protect the brand name, logo, and other elements that set the business apart. Buyers should confirm trademarks are properly registered and owned by the seller. It’s also important to ensure trademarks do not infringe on others’ rights, which could result in costly legal disputes or loss of brand value.
Licensing and Regulatory Compliance
Many Florida businesses require licenses or permits to operate. Buyers should confirm the business is properly licensed and understand the steps to maintain compliance. Not all licenses automatically transfer with the sale. Some licenses, such as those for alcohol sales, healthcare, or professional services, may require additional approvals or background checks. Due diligence should confirm which licenses are transferable, which require new applications, and that all filings or approvals are completed before closing. This prevents operational interruptions under new ownership.
Ownership Approvals
If the business is owned by a corporation or LLC, the sale must be properly authorized by directors, members, or shareholders. Buyer should review the necessary corporate documents of seller to ensure the transaction is properly authorized. Failing to confirm authorization can lead to disputes about the seller’s authority to complete the transaction.
Review of Business Operations
Evaluating day-to-day operations is essential. Buyers should review financial records, workflows, and staffing. This helps uncover potential risks, operational inefficiencies, or financial issues that could affect the business after purchase.
Review of Contracts
Contracts are a cornerstone of any business. Buyers should examine vendor agreements, customer contracts, leases, and partnership arrangements to understand obligations and rights. It’s also critical to confirm contracts can be transferred, review termination clauses, and check for past disputes. Proper contract review ensures a smooth transition and avoids surprises after closing.
Transfer of Assets and Liens/Title
Reviewing assets and verifying clear title is key. Buyers should confirm the seller can legally transfer equipment, inventory, customer lists, goodwill, and other assets, and that the sale agreement identifies what’s included. It’s also important to check for liens or claims on assets, including reviewing public records like UCC filings. Any issues should be resolved before closing through lien releases, payoff letters, or purchase price adjustments.
Litigation and Regulatory Enforcement
Review potential litigation and regulatory risks, including, checking for ongoing lawsuits or disputes with customers, vendors, or employees, confirming investigations or enforcement actions by state or federal agencies, and reviewing, past violations to identify future risks. Addressing these risks during due diligence helps protect your investment and avoid surprises after closing.
How SER & Associates Can Help
At SER & Associates, we guide buyers through every stage of a business acquisition, from due diligence and contract negotiation to closing and post-sale planning. Our goal is to help clients move forward with clarity, confidence, and protection.
If you’re considering buying a business in Florida or want help reviewing a pending transaction, schedule a consultation with us today. For more insights on transactional business law, visit www.Ser-Associates.com and follow us on Instagram, Facebook, and LinkedIn!
