What does a Purchase and Sale Attorney in Oswego, Illinois Do for a Franchise?

 Posted on January 23, 2023 in Business Law

What is the First Step in the Sale and Purchase of a Franchise?

The purchase or sale of a franchise is a major investment transaction. The process is complex and requires varying different legal documents. Documents prepared involved in the purchase or sale of a franchise require meticulous preparation.

Letter of Intent

Creation of the letter of intent is the first step in the purchase or sale process involving a franchise. The first step is creating the letter of intent (also known as “LOI”). The letter of intent declares the buyer’s intention to purchase a seller’s franchise. It summarizes several aspects of the deal including the parties involved in the transaction, the deposit amount, and the purchase price, and specifies key terms such as how the deal is going to be financed and determining a buyer due diligence period.

In summary, the letter of intent establishes the basic terms of a business deal. The letter of intent is different than an asset purchase agreement (more information below) because it is not a binding legal agreement. The letter of intent is simply the first step before developing a franchise purchase agreement.

Is a Letter of Intent Necessary?

A letter of intent is necessary for many 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. Thus, the LOI restricts the business deal between the buyer and seller. Further, the letter of intent shows the seller the seriousness of the buyer and usually will include earnest money or a down payment evidencing their seriousness, and the LOI is the first step in consummating a business deal for the franchise purchase or sale.

What is the Next Step in the Sale and Purchase of a Franchise?

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

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 key information. The APA will include 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, which will restrict the seller’s ability to compete against the buyer for a certain time within a certain geographic radius.

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 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 information that is financially valuable, embarrassing, or important to remain private.

What Can a Purchase and Sale Attorney Do for You?

If you are thinking about buying a business or franchise, it is advised to hire an attorney because of the complex nature of business and the law. You want to know exactly what you are agreeing to before you agree to it to avoid any surprises later. There is a lot at stake for both the buyer and seller in these transactions and it is important to have your goals represented by an expert in this area of law.

For example, the buyer’s due diligence period can make or break a deal. It is critical to address any issues of concern and obtain wise legal and business advice. The due diligence period is intended to identify concerns such as profit and loss statements, legal issues, and financial risks involved in the transaction. Hiring a purchase and sale attorney with experience and expertise from Gateville Law Firm means you will have a resolute individual who knows the law to represent you through each step of the purchase process and ensure your goals are met.

In addition to the complexity of the purchase and sale process itself, there is the added complexity of taxes. It is crucial to ensure you are protected from unintended tax consequences. A tax clearance certificate from the Illinois Department of Revenue and Illinois Department of Employment Security is one step to protect a buyer from such unintended tax consequences because the purpose of the certificate is to identify any tax liens or other issues, which could impact the purchase or sale of the franchise.

Oswego Franchise 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 the sale, purchase, and lease of 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 the purchase and sale of a franchise in Oswego by calling us at 630-780-1034 or via the online form on our website.