Instead of starting a business from the ground up, you can buy an LLC that’s already established. But before you take the plunge, you’ll need to know how to buy an LLC.
Our guide walks you through the five steps of buying an LLC and answers commonly asked questions about the process. We hope to answer your questions about purchasing an LLC or starting a new one.
The first step in buying an existing LLC is to search for the right business to buy. Perform market research to determine the appropriate industry and company for your situation. From there, you can start to answer the question, “How much does it cost to buy an LLC?”
When looking into whether and how to buy an existing LLC, keep the following in mind:
Once you decide on an LLC purchase you’d like to make, the next step to buying an LLC from someone is to start negotiations.
The second step to buying an LLC is to start negotiations. There are techniques you can use to help maximize the information you have at your disposal and your chances of landing a good deal.
Before you start discussing the price of the LLC for sale with anyone, make sure you’re negotiating with someone authorized to do so. You can typically find this information in the LLC’s operating agreement and Articles of Organization.
If you’re acting on behalf of an LLC, you must also have the authority to do so.
The first goal of negotiating is to start a conversation. You’ll want to learn more about the business and to have access to the following resources regarding the LLC:
Essentially, you want to learn everything you can about the business. Since you’re looking to buy an LLC, you want to know what your money’s going toward. In return, the LLC will likely ask you to provide a financial statement to prove you can afford to buy the business.
In step three of how to acquire an LLC, you create a term sheet, also called a Memorandum of Understanding. The term sheet includes the proposed conditions and terms of the transaction, including the price and structure of the deal.
In an LLC purchase, the term sheet contains essential features, such as:
The term sheet isn’t binding on its own, but it does lay the foundation for the purchase agreement, which you’ll draft and sign later.
The next step in buying an existing LLC is to conduct due diligence. Due diligence is an essential step in the transaction where you and your team complete a full investigation of the LLC to determine the risks and benefits of the purchase.
When performing due diligence, you’ll want to look at all aspects of the LLC for sale, including:
To reveal this information, review all books and records of the LLC and search public records to find information about the LLC.
When you’re satisfied that your due diligence hasn’t raised any red flags, it’s time to move on to step five: creating a purchase agreement.
The final step is to create a purchase agreement. The purchase agreement outlines the deal’s terms and, unlike the Memorandum of Understanding, is binding once signed.
The purchase agreement includes all the pertinent information about the transaction, including the following:
To finalize the transaction, the parties may sign other documents, such as leases, deeds, non-compete agreements, or other necessary contracts.
After you close the transaction, it’s time for more meaningful work to begin. For example, you’ll need to notify the state and the federal government of the change in ownership.
You might consider forming a new LLC if you purchased only LLC assets. When you do, we can help you with how to set up an LLC using our Business Formation Services.
Whether you buy an LLC or start a new business of your own, you’ll likely need services to support you. We have everything small businesses need to start, run, and grow their organization. From our Worry-Free Compliance service to our registered agent service and more, we have the valuable tools you need to succeed. Join the over 300,000 entrepreneurs who have trusted us throughout the years.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
It’s up to you whether an LLC is the proper business structure for the company or your situation. LLCs are a popular option in many cases because they provide the liability protection of a corporation with the flexibility and waiver of formalities of a partnership. That said, it may not be the right choice for everyone. Research the other business types (such as corporations) to find out more information.
A purchase agreement is a contract to buy something. In the case of how to buy an LLC, it’s the deal between the buyer and the seller. It lays out the terms and conditions they agreed on about transferring ownership of the LLC or selling part of the assets or equity of an LLC.
Due diligence is the process of performing financial, legal, and other research to determine the risks and benefits of purchasing something. One of the primary goals of due diligence is to find any red flags that can spell disaster for an unsuspecting buyer later on.
You can search online for businesses for sale or attend networking events to find out who’s selling their business.
The cost of an LLC depends on a host of factors, so there isn’t any set cost for a particular LLC. The parties typically perform extensive research on the business and the overall market, then negotiate to land on a price they believe is fair given the terms of the deal.
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