Business Transaction Attorneys in Houston

What is the difference between an asset sale and a stock sale?

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The main distinction between asset sales and stock sales exists in what exactly gets transferred between parties.

A business sale through assets means the buyer obtains specific business assets, including equipment, inventory, and intellectual property, while keeping the business entity separate. The asset purchase method attracts buyers because it allows them to select which business assets and liabilities to acquire, while discarding unwanted debts and legal issues. The acquisition of stock or membership interest in a company represents a stock sale, which enables the buyer to gain full ownership of the business entity. The buyer obtains complete ownership of all company assets, along with all existing and future liabilities, upon purchasing the business through a stock acquisition. The seller finds this structure more convenient because of its straightforward nature.

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Why do I need a lawyer for a business transaction?

 

A business lawyer provides necessary legal support to protect your interests during all stages of a business transaction. The legal team conducts due diligence, creates and reviews contracts, negotiates terms for purchase price, indemnification, and non-compete provisions, and ensures full compliance with state and federal regulations. A lawyer helps detect potential risks and liabilities that non-legal professionals would not recognize, thus protecting you from future expensive legal disputes.

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A due diligence review serves what purpose, and what does it entail in a business transaction?

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A business transaction requires a thorough assessment of the target company through due diligence before the deal is finalized. The target company undergoes a detailed evaluation of its financial documents, business contracts, legal compliance, and operational methods during the buyer's due diligence process. The process serves two essential purposes because it validates the seller's statements and reveals any concealed business problems, including outstanding lawsuits, unpaid taxes, problematic contracts, and intellectual property issues. 

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How long does a business transaction typically take?

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The duration of a business transaction depends on multiple factors, including the complexity of the sale, whether it involves assets or stock, the level of party involvement, and the requirements for due diligence.

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A simple asset sale between two parties can be completed in thirty to sixty days; however, complex mergers involving multiple stakeholders and extensive assets, as well as regulatory approvals, may require six months to one year or longer to finalize.

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What legal documents are required for buying or selling a business in Texas?

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The legal documents needed for business transactions in Texas include:

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A Texas business transaction requires several essential documents, starting with a Letter of Intent (LOI), followed by a Purchase Agreement that can be either an Asset Purchase Agreement or a Stock Purchase Agreement, and including a Non-Disclosure Agreement (NDA) and a Bill of Sale. The specific requirements of each deal determine whether additional documents are necessary, such as a promissory note for seller financing, an assignment of leases, or a non-compete agreement.

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What does a Letter of Intent (LOI) represent in business transactions?

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A Letter of Intent serves as an initial, non-binding document that outlines the essential terms and conditions of a proposed business transaction. The document demonstrates transaction interest while guiding the creation of the final legally binding agreement. The majority of LOI content lacks enforceable legal status, but confidentiality and exclusivity provisions within the document remain binding.

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What are representations and warranties?

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The seller provides the buyer with factual statements about the business condition through representations and warranties. The seller provides two examples of representations, stating that their financial reports accurately reflect the information and that there are no active legal cases. The buyer can use an indemnification clause to claim compensation from the seller if any post-sale representation proves to be false.

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What is a non-compete agreement in a business sale?

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A non-compete agreement in business sales restricts sellers from establishing new businesses that compete with their recently sold company.

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A non-compete agreement within a business sale restricts the seller from launching any new business that competes directly with the recently acquired company. The Texas courts require non-compete agreements to maintain specific boundaries regarding scope, time duration, and geographic reach for them to become enforceable. The acquired business value depends heavily on non-compete agreements because they protect both goodwill and client relationships.

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A person who has signed a contract can they withdraw from their business deal?

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A signed definitive purchase agreement creates a legally enforceable contract that cannot be canceled without proper legal justification. A party who leaves the agreement without proper legal grounds will face a breach of contract lawsuit which may result in substantial financial penalties. The agreement contains details about when each party can end their obligations without facing penalties.

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What is an earn-out, and how does it work?

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An earn-out payment structure requires sellers to receive their purchase price through future business performance metrics after the sale.

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The earn-out payment method allows sellers to receive their purchase price through business performance metrics that become due after the acquisition. The payment structure helps to connect the valuation differences between buyers and sellers. The seller will get additional payment when the business reaches its revenue targets during the first two years following acquisition. The implementation of earn-outs requires precise legal wording to prevent future disagreements between parties.