Buying or selling a business is a complex process, as both the buyer and the seller must consider a series of factors that influence before, during, and after the transaction.
Each process is different because every business is unique. They all have their peculiarities, and there are usually so many that it's best to leave them in the hands of a qualified professional team. They will provide an objective valuation, necessary to negotiate under the best, yet realistic, conditions.
"When we engage in business, we know that it involves many risks, but we also know that it encompasses many related areas. This is legally called structuring an operation," explains our managing partner, Hector Torres.
Our specialist in business consulting exemplifies this when someone purchases a business or a company; they usually need to review financial, commercial, and legal matters. This is called giving structure to the operation.
"You will likely need the professional assistance of accountants, finance experts, and a lawyer when acquiring a company. However, it is also important not to forget to conduct a review with shareholders or individuals directly involved," emphasizes Torres.
In light of this, our lawyer recommends requesting the legal, operational, and financial agreements of the company being acquired. This will determine the obligations and responsibilities being assumed.
Among the records and documents that our managing partner recommends requesting are: financial statements from recent years, every agreement the organization has entered into, monthly and annual tax statements, inventory records, asset lists, anti-money laundering program, operating licenses and permits, solvency records.
"It is quite common that, from a legal standpoint, the business numbers may seem outstanding, but the tax and fiscal aspects can make it expensive or unprofitable. It is always advisable to structure the operations to avoid future risks," says Torres.
Furthermore, Torres mentions other mechanisms to avoid issues with the new business, such as warranty clauses to ensure commitments from the other party, establishing resolutive conditions, or drafting a letter of intent to lay the groundwork for the future sales contract and guarantees.
For inquiries, you can contact us through our social media channels or visit our offices in the Escalón neighborhood, San Salvador.
-Written by the Torres Legal Team.