What you need to know before investing in a business in Florida
If you are thinking about investing in an existing Florida business, you should know that Florida law deems those who participate in business ventures to be sophisticated businesspeople to a certain degree. Therefore, you must do your due diligence before closing the transaction. While the level and amount of due diligence is specific to the particular transaction, at least some due diligence should be undertaken.
Is investing in a business a good idea
Investing in a going concern may be an alternative to more traditional investments like stock or real estate markets. Any investor should start by requesting to examine the corporate formation and corporate governance documents as well as its books and records. Making an investment in an existing business is different from buying the complete business or starting one anew. Information on those approaches are at the highlighted links.
Florida law requires businesses to maintain certain books and records. These can illuminate how the business has been operated. Given that these are sensitive internal business documents, you should expect that the business may require you as an investor to sign a confidentiality and non-disclosure agreement. An NDA is a prudent step that demonstrates sophistication and protects the business from anyone who might choose instead to compete against it with its own data.
Florida law requires businesses to maintain certain books and records. These can illuminate how the business has been operated. Given that these are sensitive internal business documents, you should expect that the business may require you as an investor to sign a confidentiality and non-disclosure agreement. An NDA is a prudent step that demonstrates sophistication and protects the business from anyone who might choose instead to compete against it with its own data.
What due diligence should I do
The primary goal of business due diligence is to test the veracity of the representations of the seller. The due diligence that you should consider undertaking before investing in a Florida business can include reviews of the internal financial operations, online business health, and verification of assets.
Your due diligence may also include, investigating the community where the business operates and customer demographics. In addition to business lawyers, financial professionals like CPAs together with valuation experts and business brokers can provide good assistance and guidance in determining the health of a business.
Your due diligence may also include, investigating the community where the business operates and customer demographics. In addition to business lawyers, financial professionals like CPAs together with valuation experts and business brokers can provide good assistance and guidance in determining the health of a business.
Can I totally rely on the company’s representations
You are entitled to rely on certain representations by the company. But relying on representations of the business without performing any independent verification may place you in a precarious position later. You may also incur substantial litigation expenses that you could have avoided.
Florida law has grown increasingly complex as to whether reliance is justified and proper. A significant factor is the degree to which a representation impacted your ability to verify information.
Business investors who fail to conduct any pre-purchase investigation or due diligence essentially fail to plan and consequently have a plan to fail. Upon identifying an investment opportunity a better approach is to retain qualified experts to help you in the due diligence process. A good business lawyer will also help identify representations on which you might need to focus to avoid problems later.
Florida law has grown increasingly complex as to whether reliance is justified and proper. A significant factor is the degree to which a representation impacted your ability to verify information.
Business investors who fail to conduct any pre-purchase investigation or due diligence essentially fail to plan and consequently have a plan to fail. Upon identifying an investment opportunity a better approach is to retain qualified experts to help you in the due diligence process. A good business lawyer will also help identify representations on which you might need to focus to avoid problems later.
How do I document my investment in a business
When you invest in a business you want your investment clearly documented in the corporate books and records. Before committing to invest it is prudent to seek the advice of a good corporate lawyer as to how best to document the investment.
It is equally smart to seek advice from your financial or tax advisor as to how to structure the investment. Consulting with such professionals helps you to understand the liabilities that you may potentially assume. It also allows you to decide how to structure and document the investment to minimize that exposure if that is your goal.
It is equally smart to seek advice from your financial or tax advisor as to how to structure the investment. Consulting with such professionals helps you to understand the liabilities that you may potentially assume. It also allows you to decide how to structure and document the investment to minimize that exposure if that is your goal.
Conclusions on investing in a Florida business
Investing in a business is a personal decision. It should be made only after substantial due diligence and investigation. It is also important to document that investigation and the representations of the business made therein. While all problems may not be completely avoidable, a solid business lawyer can guide you in the process and significantly reduce those for you.
Written by expert business lawyer David Steinfeld
David Steinfeld is one of the few Board Certified business law experts in Florida. He has been licensed for over 25 years. He is AV-Preeminent rated, ranked as one of the Best Lawyers in America by U.S. News and World Report, and consistently named a Florida Super Lawyer and one of Florida’s Legal Elite. Dave has also received Martindale’s prestigious Judicial Edition Award for high reviews by Judges, its Platinum Client Champion Award and has a 10.0-Superb rating on AVVO as well as a 10.0 rating on Justia, lawyer reviews websites.
Check out business lawyer David Steinfeld online for helpful videos and articles on Florida business law, real estate disputes, and electronic discovery solutions for your business. This article is provided for informational purposes only.
Check out business lawyer David Steinfeld online for helpful videos and articles on Florida business law, real estate disputes, and electronic discovery solutions for your business. This article is provided for informational purposes only.
