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Working with Stein Sperling attorney can help prevent costly mistakes and minimize risk when you are buying or selling a business. If you are buying or selling a business, you must protect yourself. 

The letter of intent is typically the first step in this process. A letter of intent sets forth the material terms of the transaction. While the letter of intent is typically nonbinding, there are a few provisions that should be binding on the parties. For example, the confidentiality and “no-shop” provisions should be binding. Typically, the material terms that have been negotiated during the letter of intent phase of the transaction will not be renegotiated absent the discovery of new information during the due diligence phase. 

There are two ways to buy or sell a business – through an asset purchase or stock purchase. An asset sale means that a buyer is simply buying the assets, whether it is all or just some of the assets. This is the method favored by buyers who do not want to assume the seller’s liabilities. On the other hand, sellers often prefer stock sales because of the favorable tax treatment. 

It is important to understand all of your rights and obligations, including the multitude of representations and warranties contained within the purchase agreement, as well as the indemnification provisions. These are two of the more highly negotiated provisions aside from the actual purchase price.