Buying A Business Entity

Negotiating a stock or membership purchase agreement is a complex process that requires careful planning and attention to detail. These agreements are used when buying or selling ownership interests in an entity, such as stocks (in the case of a corporation) or membership interests (in the case of a limited liability company). The process may be complicated but here are a few tips that may aid in making this process go smoother. 

Before negotiating any purchase agreement, you will need to understand the parties. If you are the buyer, you’ll want to understand the seller’s motivations for selling and the history of the company. If you are the seller, you’ll want to know the buyer’s intentions for the company and the buyer’s plans for the future.


The next step is to identify the key terms and issues that will be negotiated in the purchase agreement. These can include:

  • Purchase Price: The price that the buyer will pay for the ownership interest.
  • Payment Terms: How the purchase price will be paid (e.g., cash, stock, or a combination of both), and any conditions or contingencies that must be met before payment is made.
  • Representations and Warranties: Statements made by the seller about the condition of the company, its financial performance, and other key aspects of the business.
  • Indemnification: A provision that may require one party to compensate another party for certain costs and expenses.
  • Post-Closing Obligations: Any obligations that the parties have after the sale is completed, such as non-compete agreements, employment agreements, or other commitments.
  • Conditions to Closing: Any conditions or contingencies that must be met before the sale can be completed.

Once you have identified the key terms and issues, prepare for negotiation. This includes:

  • Setting a Negotiation Strategy: Determine your negotiation strategy, including your ideal outcome, your walkaway point, and your negotiation tactics.
  • Gathering Information: Gather as much information as possible about the other party, including the party’s motivations, objectives, and previous negotiations.
  • Anticipating Objections: Identify potential objections or issues that may arise during negotiation and prepare responses.
  • Considering Alternatives: Consider alternative scenarios and outcomes that may arise if the negotiation is unsuccessful.

During the negotiation, remain focused on the key terms and issues, and be aware of what you are willing or unwilling to compromise. Tips for successful negotiation include:

  • Communicating Clearly: Clearly communicate your position and the reasons behind it.
  • Active Listening: Listen carefully to the other party’s concerns and objectives and be open to compromise.
  • Creative Problem Solving: Be creative in finding solutions that meet both parties’ needs.
  • Professionalism: Maintain a professional demeanor throughout the negotiation process.

Once the negotiation is complete, finalizing the purchase agreement is important. This includes:

  • Reviewing the Agreement: Carefully review the agreement to ensure that it accurately reflects the terms negotiated during the negotiation.
  • Obtaining Signatures: Ensure that all parties sign the agreement.
  • Complying with Legal Requirements: Ensure that the agreement complies with all legal requirements, including any necessary filings with government agencies.
  • Closing the Sale: Complete any final steps necessary to close the sale, such as transferring ownership and making any required payments.

Purchasing stocks or membership interests is no simple task. The process often involves many intertwining parts and, if anything goes wrong, the deal could fail. If you are interested in more information or if you would like assistance in a stock purchasing agreement or any other type of contract, please contact Private Corporate Counsel.

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