Question 1

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

Accepted Answer

In an asset sale, the buyer purchases specific assets and, in some cases, assumes specific liabilities of the business, while the seller's entity continues to exist and typically retains liabilities that were not expressly assumed. In a stock or membership interest sale, the buyer acquires ownership of the entity itself, along with its existing assets, contracts, and liabilities, known and unknown. Buyers in Florida often prefer asset purchases because they generally allow more control over which liabilities transfer, while sellers may prefer stock sales for tax and simplicity reasons. The right structure depends on the entity type, the contracts and licenses involved, and each party's tax position, so we typically recommend coordinating the decision with the client's accountant.

Question 2

What should be included in a due diligence checklist when buying a business?

Accepted Answer

A due diligence review generally covers corporate formation documents and good standing, financial statements and tax returns, material contracts and leases, outstanding debt and liens, litigation and regulatory history, employment agreements and benefit plans, intellectual property and licensing, insurance coverage, and any permits specific to the industry. In Florida, buyers of certain businesses (such as those requiring professional or occupational licenses) should also confirm license transferability. The scope of diligence generally scales with the size and complexity of the transaction, and timelines can vary accordingly.

Question 3

How long does it typically take to buy or sell a business in Florida?

Accepted Answer

Timelines vary widely depending on the size of the transaction, whether financing or SBA loan approval is involved, the complexity of due diligence, and how quickly the parties negotiate the purchase agreement. A straightforward small-business transaction may move from letter of intent to closing in a matter of weeks, while larger or more complex deals, or those involving financing contingencies, licensing transfers, or landlord consents, can take several months. We generally recommend building a realistic timeline into the letter of intent so both sides have aligned expectations.

Question 4

How is the purchase price allocated between assets in a business sale?

Accepted Answer

In an asset sale, the purchase price is generally allocated among asset categories such as equipment, inventory, real property, goodwill, and non-compete covenants. This allocation affects how the buyer depreciates or amortizes the purchase price and how the seller recognizes gain, and in many transactions the IRS requires both parties to report a consistent allocation on Form 8594. Because allocation can meaningfully affect each party's tax outcome, we typically negotiate allocation terms in the purchase agreement and recommend that clients coordinate the specifics with their tax advisor or accountant.

Question 5

Are non-compete agreements enforceable when a business is sold in Florida?

Accepted Answer

Florida law, under Section 542.335 of the Florida Statutes, generally permits reasonable restrictive covenants in connection with the sale of a business, including non-compete and non-solicitation provisions tied to the sale of goodwill. Courts typically evaluate whether the covenant protects a legitimate business interest and whether its time period and geographic scope are reasonable, and non-competes tied to a business sale are often given more latitude than those in an ordinary employment agreement. Because enforceability turns on the specific facts and drafting, we typically tailor these provisions to the transaction rather than relying on generic contract language.

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Frequently Asked Questions

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

What should be included in a due diligence checklist when buying a business?

How long does it typically take to buy or sell a business in Florida?

How is the purchase price allocated between assets in a business sale?

Are non-compete agreements enforceable when a business is sold in Florida?

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