Selling Or Buying a Franchise Business

 Posted on August 11, 2022 in Business Law

Oswego and Kendall County Franchise Business Attorneys

The purchase or sale of a franchise is a major investment transaction. The process is complex and requires varying different legal documents, which require precision and understanding. The first step in the sale and purchase of a franchise is the letter of intent.

Letter of Intent Attorney in Kendall County and Nearby Areas

The Letter of intent or “LOI” is necessary for several reasons:

•  The Letter of Intent guarantees the franchise will be sold to the agreed buyer even if other potential buyers appear in the future. Thus, the LOI restricts the business deal between the buyer and seller.
• The Letter of Intent shows seriousness by the Buyer and usually will include earnest money or a down payment evidencing their seriousness.
• The Letter of Intent is the first step in consummating a business deal for the franchise purchase or sale.

The letter of intent summarizes the parties involved in the transaction, the deposit amount, the purchase price, and key terms such as how the deal is going to be financed and determines a buyer due diligence period. In summary, the letter of intent is a written and legal document declaring the buyer’s intentions to purchase a seller’s franchise.

The letter of intent establishes the basic terms of a business deal. The letter of intent is not a binding legal agreement unlike an asset purchase agreement. The letter of intent is the first step prior to developing a franchise purchase agreement.

Yorkville and Kendall County Asset Purchase Agreement Attorneys

An Asset Purchase Agreement or otherwise known as an “APA,” is a legal binding document that summarizes the legal terms and conditions related to the sale and purchase of a franchise. The Asset Purchase Agreement will describe the parties; the financing of the sale; list of purchase assets and values established to such assets; disclosure of any litigation or disputed claims; and the closing date.

The Asset Purchase Agreement also will include a non-disclosure agreement and a non-compete provision, which will restrict the seller’s ability to compete against the buyer for a certain time frame and geographic radius.

Non-Disclosure Agreement or NDA

A Non-Disclosure Agreement is a contract that establishes a requirement of confidentiality. Confidentiality is important 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 financially valuable and embarrassing information.

Kendall County Franchise Sale Attorneys

Before buying a business or franchise, the hiring of an attorney is a wise decision. The buyer’s due diligence period can make or break a deal. It is important to address any issues of concern and get business and wise legal advice. Due diligence period is intended to identify concerns such as profit and loss statements, legal issues, and financial risks involved in the transaction.

A Tax Clearance Certificate from the Illinois Department of Revenue and Illinois Department of Employment Security is one of the steps to protect a buyer from unintended tax consequences. The purpose of a Tax Clearance Certificate is to identify any tax liens or other issues, which could impact the purchase or sale of the franchise.

Contact Gateville Law Firm to assist you with the purchase and sale of a Franchise in Plainfield, Joliet, Yorkville, Oswego, Aurora, Montgomery, and Kendall County and nearby areas. Reach us at 630-780-1034 or via online form.