The process of buying a business can be intimidating.  The entire production to find the right business for sale, meet with the business broker or owner, negotiate deal terms and conduct due diligence can be a lot of work.  When all conditions on a sale are finally waived, many buyers assume that the remaining duty they have is to wait until the closing date.  The reality is that there is a significant amount of work left in the process.  Below is a summary of activities that must occur after a deal is ‘firm’ but not yet closed.

Searches on the business from lawyers
The lawyers for a buyer of a small business typically conduct searches on small businesses at this time.  For instance, in the province of Ontario under the Bulk Sales Act, it is stipulated that no liabilities shall remain on the business past closing.  A lawyer will do searches to ensure that there are no liens or encumbrances on any assets being purchased.

Incorporating a company
If you purchased a business in trust for a business to be incorporated you must now go through the process of creating your corporate entity for the purchase.  In Ontario you may also need a PST vendor permit, GST/HST number, WSIB registration or a liquor license and so on.  Work with your business broker and lawyer to make sure that you’re ready for the deal to close.

Utilities and business communications
When you buy a business, you will also probably need to ensure that utilities are properly transferred over.  This may also entail cell phones, fax numbers, domain registration and web hosting, yellow pages advertising and so on.  Ideally, all of these issues should have been clearly articulated in the purchase agreement but if they were not, it would be best to work with the seller to get these detailed finalized.

Counting final inventory with the business seller
If the business you are buying has inventory as part of the deal, you may be required to participate in a final count.  Again, this is something that should have been put into an agreement but if not, work with the seller on a process.  Find out if the seller shall conduct the count with the buyer present.  Will a detailed count be conducted or will a spot check of current values suffice?

Employment agreements for staff
If you are purchasing a business where the seller has paid severance to employees up to the date of close, you might be starting with a new slate with the employees.  In that case, you will likely need to work with your lawyer on drafting a letter or employment agreement to present to the staff members once you take over the business.

Telling the staff the business is sold
The other issue to think about is when to tell the staff that the business is sold (if they don’t already know).  It is in the buyer’s best interest to ensure that the staff are comfortable with the news and that the transition go as smoothly as possible.

Communicating the business sale to customers & vendors
Another issue to think about is communicating the sale of the business to customers to vendors.  How customers are told can be very critical to the success of the business going forward.  For instance, you may decide to not tell customers until after the deal is formalized and let them find out as they do.  Another option is to send out a mass communication to clients to advise them on the change.  The key is to announce the news in such a way so that the customers are comfortable with it.  Work with the seller to get their input too.  After all, they do know the customers best and would have good feedback for you.  The same would apply for the vendors of the business – work with your seller or business broker to get different opinions.

There are many details to buying a business that most people don't think about them all.  There are certainly many more things to work out for a business sale transaction to close, these are merely a few.  Work with your business broker, lawyer and accountant to be properly prepared for closing day.


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