When you purchase a business as a going concern, what documents and things would you expect to have turned over?

It’s my understanding that, when a business is purchased, absolutely everything to be transferred is spelled out in the sale contract in detail.

Has the business not been running for 9+ months before the purchase? Or just the primary shop/storefront shut down? It sounds like the business was failing, perhaps?

A failing business could be all the assets you’ve listed, or something as small as just the name. It really depends on what’s spelled out in the agreement.

I’ve been parts of companies that were sold just for the software involved, or just the customer information, or broken into pieces so the employees could continue the work. I don’t think there’s a general rule of thumb when a place is closing.

ETA: I understand you’ve said a “going concern” but that may not be how they’ve seen it if significant portions are closed or closing. It should still be spelled out in some way before the transfer.

No, the entirety of the company was purchased. All accounts and assets. The company had been running for over two years before the purchase. I was blocked out as a one-third owner because I disagreed with the other two’s decisions. They brought in someone who paid nothing to the company and offered a product of much lesser quality, that they knew I was on record as being against, that competed with mine behind my back. She was allowed to watch the shop in lieu of one of the partners who decided she couldn’t meet her obligation. (Which I always did, come hell or high water and was the only partner to do so, because the other partner got their daughter in to watch the shop.) They eventually decided that I would no longer take my watch in the store and before that, they changed all passwords so I could not access sales information or bank transactions and started to hold meetings without me. I told them I would offer my share to this new person, but they told me be basically stuff it, and that I was still on the hook for a third of the costs of running the shop, even though they had kicked me out. They wanted me out, but they wanted my money.

The going concern part is that, even though the physical location of the shop has closed, there are other ‘pop up’ avenues that can be taken advantage of as well as seasonal fairs that are traditionally held. By deleting all marketing and correspondence, they have erased contacts that would have been leads on future strains of income.

yeah, I know, this is a legal situation that I should have taken them to task to before this.

What is documented in the sale contract? That is what matters.

There didnt’ need to be a ‘sales contract’ because I was a current owner and was simply taking over the company. It was assumed to be the ongoing business because the 2016 accounts hadn’t been started because of the debt owed to the accountants. Because I was a current shareholder, it was a simple taking over of the company by way of purchasing out my fellow shareholders.

If it’s not in writing, it’s going to be extremely difficult to prove. If it wasn’t explicitly stated, it doesn’t exist.

When I bought my business I got all the assets, formulas, customer files, accounting software, computers, phone system, email and data base….the whole shebang. All that stuff was only valued at 15% of the purchase price the rest of the price was the Goodwill of the company and a big part of that was me and my experience of working here for 16 years prior the rest was the reputation of the company.

Have you contacted all your vendors? Another thing if you haven’t already tried this, you may try contacting your email provider as they may have a backup on their server. I have to log into their server to manually delete all the backed up emails I no longer need. Also do you have that email account on any other computer? You may still have emails in the mailboxes.

But what you have described of your partners I would think you may have a case against them for breach of their fiduciary duties to the partnership. Your partnership agreement should speak to all the “what if’s” when there is turmoil such as you describe here. What has your lawyer advised you on all this?

Thank you, @Cruiser I am eager to learn what my lawyer says about all of this. We have nver had a firm lawyer before.

We just purchased our business in June and before the purchase we were given the tax returns, but once we purchased we were given the customer files and training for a month. The training included meeting with the vendors if they were local (otherwise the vendor contact info) actually doing the job start to finish, including how sales were recorded, dealing with customers, ordering stock, everything.

Before I bought the business the previous owner definitely played down how much work it was, especially the bookkeeping aspect.

The business didn’t have any email correspondence except purchase receipts, so that didn’t apply to us, but if there was ongoing correspondence that mattered to the smooth transition of the business, or as historical data pertinent to ongoing business, then I think it definitely should have been turned over. In fact, I would have expected maybe to buy the email address in the sale of the business. I’m not sure. This is kind of interesting actually. Our email address is under our corporate name, not our DBA name.

Your contract should list everything that the sale includes.

Can you just start it up by yourself, from scratch?

Why did I just invest all this money in it then?

@cazzie: I thought you hadn’t actually made the purchase yet. I think you said that somewhere else (not on this thread).

I invested extra capital into it as a ⅓ owner so that the accountants could be paid so that the 2016 accounts would be finished. (the other two did it earlier in the year after they kicked me out to pay a tax bill) The accountants stopped work due to amount due. The one who was looking after the accounting (after they kicked me out) wasn’t able to do anything herself and had the accountants do everything and it accumulated fast. If the end of year accounts aren’t filed with the tax department, there would have been even more penalties. But, I haven’t paid for or transferred the shares into my name alone yet.

@cazzie If the sellers are doing anything to sabotage the business doing well going forward I’d definitely talk to a lawyer. If they just made the business sound better than it actually is, then that happens all the time in business sales, and that part would be a grey area I think. A close friend of a friend of mine is a business broker for many years, and he told me, “all sellers are liars, and all buyers are thieves.” Just a saying I guess they use.

This is outright sabotage. I’m seeing a lawyer today at 13.30.

I’ll be interested to know what the lawyer said. Hopefully, he can help you.

I’ll add that in America it’s advised to either have a loan with the seller, or escrow money. This way they have a vested interested in the business doing well. If the business folds then the new buyer will likely default on the loan.

Also, make sure you have a noncompete clause.

@cazzie Do bring a copy of your partnership agreement, by laws and any other documents pertaining to finances and outstanding obligations or loans. Do ask your lawyer about this “lock out” that happened and to go over whether it was an illegal lockout or did they have cause to do what they did. If they deem it was an unlawful lock out, the other partners could be liable for damages.

Also I am fairly certain your partners could be held liable for breaking their fiduciary responsibilities to you and the partnership. This is a serious offense at least our courts take very seriously. Establishing the extent or degree of their breech of their fiduciary duties if any could then give you leverage in your negotiations. Also ask the lawyer about hostile takeovers and what possibilities exist of your other partners voting you off the board of directors, firing you and then taking over your shares. Of course they would have to buy your shares if there is any value left in the company that is.

Oh, I did all that. I’ll write more later tonight about what happened. I met both a lawyer (for free!!) and the company accountant today. Let’s just say, I’m feeling pretty happy. I am now the managing director and sole shareholder. They got paid exactly 1NOK for their shares in total, not each. I bought the thing for 2NOK and I’m going to be able to write about 100,000NOK off my income for this year. ;)

Sounds good.

I’m confused but good for you!