This term sheet summarizes the key terms of the acquisition in the [Target Company], Inc. (hereinafter referred to as the “Company”) by XXXXX Inc. (a Californian company) directly or through one of its affiliates (“Buyer”). This non-binding term sheet is linked to a possible transaction in which the “Buyer” would acquire the entire activity (as defined below) of the “Target”. This term sheet does not create a legally binding obligation or an obligation to invest until the definitive agreements have been signed and delivered by all parties involved in the transaction. One question: I have a part of a big company that I want to sell. I would like to prepare a letter of intent, an offer to sell or a document recommended by you. I spoke to a potential buyer who asked for a quote. I would like to include assets, goodwill, non-compete obligation, employees, inventory, etc. in the document as well as the terms of my offer. Can you please recommend the document that you think best suits my needs? A memorandum of understanding may seem complicated and as if it were full of legal jargon that might be difficult to understand. Nevertheless, it is a fairly simple document to read and understand. You may have never heard the word memorandum.

This term sheet is not a binding contract or agreement, but only the expression of a possible commercial transaction between the target and the buyer. Neither party is related to a transaction until the parties to that transaction have entered into definitive agreements. There are some states where you have to prove to your buyer that no sales tax is owed by your customers. If you live in one of these states, you will need to go to your local tax authorities and get a tax certificate from them to prove that they do not owe taxes. If taxes are currently due, a portion of the purchase price must be used to pay those taxes before the business can be transferred to the buyer. All this can be done no later than the day of closure. Also keep in mind that the actual sale of the business is also likely to be subject to sales and/or transfer taxes. Some states charge these taxes for the sale of the company, its assets, and/or company securities, such as shares.

When all agreements, due diligence, and financing have been entered into and you have complied with state laws, the final step is to close the transaction and transfer ownership of the company to the buyer. This involves signing a variety of legal contracts that grant the buyer ownership of various aspects of the business. If you have followed all the steps listed above, you should not have any more problems from that moment on. The first step is to create a letter of intent. This is a legal document that summarizes all the terms and conditions of the transaction, e.B. purchase price, due diligence conditions, deposit amount, etc. Some buyers create their own letter of intent and then submit it to you for approval. If you need to make changes, create your own letter of intent (also known as a term sheet, business purchase proposal, purchase offer) with the changes and ask the buyer to approve them. If you look at how a real estate transaction works, you`ve seen how much paperwork it entails. It seems that there is only one document at a time, and it is difficult to keep track. To assist you, we have developed this comprehensive review of one of these documents: a model Memorandum of Understanding. This review will explain everything you need to know about this real estate document and make it easy for you to understand it.

What is a Memorandum of Understanding? Is it a legally binding document? What happens if you break the agreement? What can you expect in a sample memorandum of understanding? It`s important for a seller to let the buyer do their own due diligence, as this will help protect you when a sale is made. For example, if the buyer buys your business and then sues you for claiming you weren`t honest about how many customers your business receives per month, the due diligence clause will protect you in court. Basically, if the buyer acknowledges in a legal contract that he has done his own due diligence and is still ready to proceed with the purchase of the company, he cannot come back later and claim that he did not know some information about the company. As long as you provide them with accurate documents about your business during their due diligence process, they have no legal basis to sue you. The only thing you need to worry about during these negotiations is to keep sensitive information about your business confidential. Because the buyer does their due diligence and reviews your company`s financial and customer information, you don`t want them to walk away from the business and then use that information for their personal benefit. For this reason, a letter of intent should include a confidentiality agreement that prevents the buyer from using your information or sharing it with another source if the sale does not take place. This is the best protection you can afford yourself as a seller while trying to enter into a purchase agreement with a buyer. Once the buyer has reviewed all of these documents, they can ask you if they can personally inspect your company`s facilities. This is a big part of their due diligence, as it allows them to see the business in action and how the organization is managed. This can slow down your employees` productivity a bit, but you should still leave it to the buyer.

Otherwise, they will become suspicious if you tell them that they cannot inspect the facility. In the meantime, a letter of intent has been signed and your buyer has done their due diligence with respect to your business. If they are still interested in proceeding with the purchase of your business, you will need to create a purchase contract to officially begin the transaction. Unlike the letter of intent, the purchase contract is a binding contract that obliges the buyer to buy your property at the price and conditions agreed in the document. The buyer`s payment method is something you need to know right away. If you are lucky enough to find a cash buyer for your business, it will be a very smooth transaction. However, in most cases, buyers will either try to get financing from a bank or they will ask you to give them a seller financing contract. Here you agree to accept monthly payments from them in exchange for ownership of the business. Unless you`re really desperate to sell or you`re confident that the buyer will make the deal, it`s best to avoid seller financing. Otherwise, if your buyer defaults, you`ll need to go through a legal process to get ownership of your business back. At this point, the buyer could have driven your business into ruins. It is best to consult your lawyer to find out what type of payment can best be accepted by the buyer.

Once a purchase contract is signed, the agreement is binding. Although, as you will learn, it has more to do with the purchase contract than with the memorandum. A term sheet is a written document that the parties exchange and that contains the important terms of the company. The document summarizes the key points of transaction agreements and clarifies the differences before legal agreements are actually executed and tedious due diligence begins. When you sell your business, there is a specific legal process that must be followed. It`s not that you can just ask the buyer to write a check and then have your business take over. There are a few legal steps to complete the sale of your business, which ensures that it will be a successful transaction for both parties. Otherwise, you run the risk of facing legal consequences after the sale if the buyer is not satisfied with any aspect of the business they bought from you. At this point, you should ask a lawyer to draft this purchase agreement for you.

Sometimes the buyer will have their own lawyer who does it. Either way, your lawyer should at least draft the clauses that protect your interests and then share them with your buyer`s lawyer. Note that a purchase agreement is not a 2-page document. Depending on the size of your business and the number of terms described, it can have hundreds of pages. For this reason, it is best to have an experienced contract law lawyer to manage the agreement and review it for you. .