Buying a Business: Elements Involved in a Share Purchase Agreement

A businessman planning

Owning a business does not necessarily involve building one from the ground up. You could opt to buy a company at various stages of its growth. This negates the hassle of getting clients and employees and building your brand.

A share purchase is the preferred option over an asset purchase when it comes to buying a company. Here, you get all the company shares, and the seller retains no continuing interest in the company.

There are different elements involved in a share purchase that licensed business brokers in Denver will help you navigate. Here are some of them.

Warranties

These include clauses and statements from the seller on your business transaction. They are comprehensive and cover various aspects of the business such as the fact that the seller is the business’ legal owner.

Indemnity

Should you discover any serious issues in your scrutiny of the business, you will have to get an indemnity to address them. This is a specific clause which provides you with a more powerful recourse compared to a warranty.

Tax indemnity is essential to protect you from any surprise tax liabilities. It allows you to get reimbursement for any undisclosed and unpaid taxes in the time before you bought the company.

Limitation of Liability

A limitation of liability clause spells out the amount and timeline of liability for any breach of your warranty by the seller. You can hence not sue the seller after a specified timeframe and for aspects above the capped amount included in the limitation of liability clause.

The above elements might leave you with buyer’s remorse if not correctly handled. There are various negotiations involved when drafting them, and without a good business broker, your interests might not be taken care of. Going it alone in a bid to save costs will leave you vulnerable.