Buying a business in California — counsel through closing.

Asset purchase versus stock purchase

Two structures. The choice drives almost everything else about the deal.

Asset purchase

Buyer takes specified assets (equipment, inventory, contracts, intellectual property, customer list) but not the legal entity. The seller's existing entity continues to exist post-closing, holding only what the buyer didn't take. Most small-to-mid acquisitions are asset purchases — buyer leaves behind unknown liabilities.

Stock purchase

Buyer takes the entity itself — its stock or membership interests. The entity continues with its existing contracts, employees, licenses, and (importantly) liabilities. Used when the entity has assets that don't transfer cleanly (regulatory licenses, key contracts with assignment restrictions) or when the seller insists on it for tax reasons.

From the buyer's perspective, asset purchase is usually preferred. From the seller's perspective, stock purchase is often preferred. The negotiation usually decides which structure the deal takes.

The phases of an acquisition

1. LOI / Term Sheet

The non-binding (mostly) document that captures the deal economics — purchase price, structure, financing contingencies, key reps and warranties, exclusivity period for diligence. Sets the framework.

2. Due diligence

Buyer's review of the seller's business — financial records, tax filings, key contracts, employment records, IP, regulatory compliance, pending litigation, environmental issues. Diligence findings usually drive purchase-price adjustments and definitive-agreement terms.

3. Definitive agreements

The asset-purchase or stock-purchase agreement, plus ancillary documents — bills of sale, assignment agreements, employment agreements for key personnel, non-compete agreements with the seller, escrow agreements where applicable.

4. Closing

Signing, funding, transfer of assets and licenses, employee transitions, customer notifications. Post-closing covenants and indemnification provisions kick in.

How acquisition pricing works

Acquisitions are scoped per deal rather than running on a tier model. Variables that drive the scope: deal size, asset complexity, regulatory issues, employment overhang, IP, real estate, licensing, and how prepared the seller is.

Typical structure: a phase-priced approach — separate fees for LOI/term-sheet phase, due diligence phase, and definitive-agreements/closing phase. The discovery call is the right place to scope it.

Buyer-side counsel for transactions over $1M typically runs $15,000–$50,000+ depending on complexity. Smaller transactions (under $500K) can often be handled in the $5,000–$15,000 range.