The Purchase and Sale of a Franchise Business in Plainfield

 Posted on February 09, 2023 in Real Estate

Plainfield Franchise Business Sale Attorney: Helping Franchises with the Purchase and Sale of a Business in Plainfield, Illinois

What Does the Process of Buying or Selling a Franchise Business Look Like?

Regardless of the type of business, purchasing or selling a franchise is a significant investment transaction for all parties involved. This sale and purchase process can be complex and requires varying legal documents that need precision and understanding to ensure they are correctly completed and that you avoid surprises. 

Step 1: Buyer’s Letter of Intent

After purchasing a franchise business, you must create a letter of intent (also known as “LOI”). The letter of intent is a legal document declaring a buyer’s intentions to purchase a seller’s franchise. The LOI summarizes several aspects of the purchase, including both parties involved in the transaction, the buyer’s deposit amount, and the purchase price of the business. Additionally, the LOI specifies critical terms of the purchase, including how the deal will be financed and determining a buyer due diligence period. 

In general, the LOI establishes the basic terms of a business deal. A letter of intent is different than an asset purchase agreement (more information below) because it is not a binding legal agreement; instead, it is the first step a buyer must take before developing a franchise purchase agreement with the seller.

Do I Need a Letter of Intent?

The LOI is the first step in consummating a business deal for the franchise purchase or sale.

A franchise buyer needs to create a letter of intent for several reasons. First, the letter of intent guarantees that the franchise will be sold to the agreed buyer even if other potential buyers appear in the future. As a result, the LOI exclusively restricts the business deal between the buyer and seller. Further, the letter of intent shows the seller the seriousness of the buyer in purchasing the franchise and will typically include earnest money or a down payment evidencing their sincerity. 

Creating a solid letter of intent for a buyer should be considered because this is the first impression a franchise seller will have. Having a knowledgeable business attorney experienced in purchasing franchise businesses is a great way to ensure your LOI has all the necessary information and is drafted correctly to get you the best deal possible. At Gateville Law Firm, we focus on business law and have years of experience helping buyers and sellers meet their goals.  

Step 2: Asset Purchase Agreement

After completing the letter of intent, the next step is creating an asset purchase agreement (also known as an "APA") and a non-disclosure agreement.

What is an Asset Purchase Agreement?

An asset purchase agreement is a legally binding document that summarizes the legal terms and conditions related to the sale and purchase of a franchise. The asset purchase agreement must include certain critical information. The APA will consist of a description of the parties, the financing of the sale, a list of purchase assets and values established to such assets, disclosure of any litigation or disputed claims, and set a closing date. Additionally, the APA will include a non-disclosure agreement and a non-compete provision, restricting the seller's ability to compete against the buyer for a particular time within a specific geographic radius.

Step 3: Non-Disclosure Agreement

What is a Non-Disclosure Agreement?

A non-disclosure agreement (also known as an "NDA") is a contract that establishes a requirement of confidentiality between the parties. Confidentiality in the sale and purchase of a franchise is essential because franchise agreements and financial statements are private and confidential documents. The NDA contractually binds the parties to maintain strict privacy and confidentiality. The buyer will possess certain trade secrets, and the business and sale process is a negotiation, which could contain information that is financially valuable, embarrassing, or important to remain private. 

What Can a Purchase and Sale Attorney Do For You?

Hiring an experienced business attorney is generally advised when considering buying a business or franchise. Business law is a complex area with multiple pages of legal jargon, which is difficult for an inexperienced corporate lawyer to understand. Legal agreements with ambiguities result in misunderstandings and litigation, increasing costs significantly. In addition, in a business transaction, there is a lot at stake for both the buyer and seller and your business attorney does not take this fact lightly.

One perfect example of the importance of having a qualified professional assisting you is the buyer’s due diligence period. The buyer’s due diligence period can make or break a deal. The due diligence period is intended to identify concerns such as profit and loss statements, legal issues, and financial risks involved in the transaction. It is critical to address any anxiety issues and obtain wise legal and business advice before deadlines are missed or mistakes that could cost you. Hiring a purchase and sale attorney with experience and expertise from Gateville Law Firm means you will have a dedicated individual who knows the law to represent you through each step of the purchase process and ensure your goals are met.

Taxes are another primary concern for buyers and sellers in these transactions, and Gateville Law Firm has this covered. Taxes can be complex and challenging to understand. A tax clearance certificate from the Illinois Department of Revenue and Illinois Department of Employment Security is one step to protecting a buyer from such unintended tax consequences because the certification aims to identify any tax liens or other issues that could impact the purchase or sale of the franchise. Again, a Gateville Law Firm professional will protect you from unintended tax consequences.

Plainfield, Illinois Franchise Purchase, and Sale Attorneys

Gateville Law Firm concentrates on business transactions involving asset purchase agreements and commercial real estate. Unlike most law firms, we have significant tax, business, asset protection, and estate planning legal expertise that is required to guide business and franchise owners in selling, purchasing, and leasing commercial property.

We can prepare legal documents with the required precision or represent you in negotiations that can significantly impact your business and family. Our firm knows the comprehensive legal issues and strategies to prepare asset purchase agreements and provide representation for letters of intent.

Contact Gateville Law Firm to assist you with purchasing and selling a franchise in Plainfield and surrounding areas by calling us at 630-780-1034 or via the online form on our website.