Buying & Selling a Business

Buying or selling a business means agreeing on three separate things: the price, the structure of the deal, and who carries responsibility for the company’s past. The structure question comes first, because it decides what actually changes hands and what the buyer inherits along with it.

Fisher Stone represents both buyers and sellers in New York business transactions, from the letter of intent through due diligence, the definitive agreement, and closing. Every matter is handled for a flat fee, quoted up front, by a licensed New York attorney working the deal from start to finish, reachable directly by call, email, or text. No call centers, no handoffs, and no guessing what representation costs before you commit to it.

Buying or selling a business in New York

A business sale transfers a company, or the assets that make it run, from one owner to another for payment. The legal work covers defining exactly what is being sold, verifying that the seller’s description of the business is accurate, allocating responsibility for existing debts and obligations, and documenting the deal so both sides can enforce it afterward.

A buyer wants to know what they are getting and which liabilities come with it. A seller wants a clean exit and protection from being pulled back into the business after handing it over. An attorney representing one side of a transaction works only for that side’s interests, which is why buyers and sellers each retain their own counsel rather than sharing one lawyer for the deal.

The three ways a business deal is structured

Nearly every business transaction in New York takes one of three forms. The choice affects which liabilities transfer, whether contracts and licenses carry over, how each side is taxed, and how much of the deal has to be documented item by item.

Asset sale

In an asset sale, the buyer purchases selected assets of the business, such as equipment, inventory, customer lists, goodwill, and the right to use the name, and leaves the seller’s original entity behind. The buyer generally does not assume the seller’s existing liabilities, which is the main reason buyers favor this structure.

That protection has limits. New York courts recognize situations where a buyer can still be held responsible for the seller’s obligations, including where the buyer expressly agrees to take them on, where the transaction amounts to a merger in everything but name, where the buyer simply continues the seller’s business unchanged, or where the sale was arranged to put assets beyond the reach of creditors. A purchase agreement has to be drafted with those exceptions in view rather than resting on a general statement that liabilities stay behind.

An asset sale also has to be carried out piece by piece. Each lease, contract, license, and account transfers individually, and many of them require the landlord’s or counterparty’s consent. New York also has a bulk sale notification procedure for sales-tax purposes, and a buyer who skips it can end up answering for sales tax the seller never paid. These are the steps that most often hold up a closing when they are left until late in the process.

Stock or membership interest sale

In a stock sale, the buyer acquires ownership of the entity itself: its shares in the case of a corporation, or its membership interests in the case of an LLC. The company continues to exist and keeps everything it already had, including its contracts, leases, licenses, employees, and its liabilities, both known and unknown. Only the owners change.

This structure is common where a business depends on agreements or approvals that would be difficult to reassign, and it is usually simpler to document, since there is no schedule of individual assets to move. Sellers tend to favor it, because the entity carries its history forward instead of leaving it with them.

Contracts do not always survive a stock sale automatically. Many agreements contain a change of control provision that treats a sale of the ownership interests the same as an assignment, so consent is still required. Some regulators likewise treat a change in ownership as an event calling for notice or approval even though the entity itself has not changed. Establishing which agreements and licenses fall into those categories belongs in due diligence, not after closing.

Mergers and acquisitions

Mergers and acquisitions is the broader category covering larger or more complex transactions, including a true merger, where two entities combine under New York law and one of them ceases to exist. In a statutory merger the surviving company receives the other company’s assets and liabilities by operation of law, without assigning them one at a time, which is a practical advantage for a business that holds a large number of contracts.

A merger requires approval from the boards and the owners of both companies and a filing with the New York Department of State, so the internal approval documents matter as much as the merger agreement. Larger deals also tend to add steps a straightforward sale does not have: an entity formed specifically to make the acquisition, financing conditions, earn-out arrangements that tie part of the price to future performance, and, in very large transactions, federal antitrust reporting before the parties are allowed to close.

Choosing the structure that fits your deal

The structure is one of the negotiated terms. Buyers and sellers usually open from opposite preferences, and where it lands depends on what the business is actually made of.

What the business runs on. A company whose value sits in a lease, a license, or a handful of long-term contracts can be awkward to sell as assets, because each of those has to be reassigned with someone else’s consent. A business whose value sits in equipment, inventory, and customer relationships usually transfers cleanly as an asset sale.

Liability exposure. Where due diligence surfaces unresolved claims, tax exposure, or regulatory problems, a buyer will push toward an asset structure, or toward indemnities and an escrow large enough to cover what the entity is carrying.

Tax treatment. The three structures are taxed differently for both sides, and the difference is often significant enough to move the price the parties settle on. That analysis belongs with your accountant before the structure is fixed, and our accounting and tax practice can handle it if you do not already have one.

Entity type. A stock sale requires an entity with ownership interests to sell. A sole proprietorship has none, so it can only be sold as assets. An LLC or partnership transfers membership or partnership interests rather than stock, and its operating agreement often restricts how and to whom those interests may be transferred, which needs checking before a deal is structured around them.

Employees. In a stock sale or a merger, employment continues uninterrupted, because the employer entity has not changed. In an asset sale, the seller’s employees are typically let go and rehired by the buyer, which raises questions about accrued time, benefits, and any existing restrictive covenants. Our employment agreements service prepares the documents on the buyer’s side.

The deal process step by step

Letter of intent

Most deals start with a letter of intent setting out the proposed price, structure, and major terms before either side invests in full due diligence and a definitive agreement. The core commercial terms are typically non-binding, though the letter often binds the parties to confidentiality and exclusivity, meaning the seller agrees not to negotiate with other buyers while the deal is being worked out. The structure is usually settled at this stage, so it is worth having counsel involved before the letter is signed rather than after.

Due diligence

Due diligence is the buyer’s review of the business before committing. It typically covers financial records, contracts and leases, employment matters, licenses and permits, intellectual property, outstanding debts, and pending litigation. In a stock sale or merger the review runs wider, because the buyer is taking the entity’s full history rather than a defined list of assets, so corporate records, past ownership changes, and tax filings come into scope as well. The purpose is to confirm the business is what the seller represents and to identify anything that should affect the price, the structure, or what the seller is asked to guarantee.

The definitive agreement

The definitive agreement is the contract that governs the transaction: an asset purchase agreement, a stock or membership interest purchase agreement, or a merger agreement, depending on the structure. It identifies exactly what is being sold, the price and payment terms, the seller’s representations and warranties about the business, what happens if one of those turns out to be inaccurate, and the conditions each side has to satisfy before anyone is obliged to close.

Closing

Closing is when the transaction completes: the purchase price changes hands, ownership or assets transfer, and any required assignments, consents, and filings take effect. A merger closes on the filing with the Department of State. An asset sale closes on a set of individual transfer documents. Assigning a lease or a key contract generally needs the landlord’s or counterparty’s consent, so those have to be lined up in advance rather than discovered as a problem on the closing date.

The terms that decide whether a deal works

The purchase price is one term among several that determine whether a transaction is worth doing on either side.

Price allocation. In an asset sale, the price has to be allocated across the assets being sold, such as equipment, inventory, real property, and goodwill. The allocation affects how each side is taxed, buyers and sellers often have opposing incentives on how it is divided, and both parties are required to report it consistently, so it is negotiated and documented rather than left open.

Representations, warranties, and indemnification. The seller’s statements about the business are what the buyer relies on beyond its own diligence. The indemnification terms decide who pays when one of those statements proves wrong, for how long the seller stays exposed, and whether that exposure is capped.

Escrow or holdback. Buyers frequently negotiate to hold back part of the price, or place it in escrow, to cover indemnity claims after closing. The amount, the duration, and the conditions for release are all negotiated terms.

Non-compete. Sellers are commonly asked not to compete with the business they just sold, within a defined area and time period. A non-compete tied to a business sale is treated differently under New York law than one in an employment contract, and it has to be reasonable in scope to hold up if it is challenged.

Transition assistance. Buyers often want the seller to stay involved after closing to introduce customers and vendors and train staff. The scope, the duration, and any compensation for it belong in the agreement rather than in an informal understanding.

Representing buyers and sellers

A buyer and a seller in the same transaction have different goals, different risks, and different information. The buyer needs an attorney who reads diligence findings critically, presses on the structure where the exposure warrants it, and negotiates protections into the agreement. The seller needs an attorney who limits post-closing exposure and secures the price and payment terms. One attorney cannot serve both interests, which is why each side retains separate counsel. Fisher Stone takes either side of a deal, and the flat fee is quoted before the work starts in both cases.

If you are the buyer and plan to hold the acquired business in a new entity, that entity has to exist before closing, and our business formation service sets it up in time for the deal. Where two or more people are buying together, the ownership terms belong in a shareholder agreement or operating agreement signed alongside the purchase. After closing, the contracts, leases, and vendor agreements that came across become part of the buyer’s daily operations, which our running a business service supports. For how this fits with everything else we handle, see our business law practice.