A party considering buying into a business in Florida should do due diligence. This applies equally for those investing in a business and those merely purchasing business assets. Some considerations in this due diligence are where to begin, to what extent one can rely on a seller’s representations, and what to document in the transaction.
Buyers need to recognize that Florida law generally deems those who participate in a business venture to be sophisticated business people. Therefore, any party involving itself in a Florida business should perform some level of due diligence. The level and amount of due diligence is highly specific to each transaction. Engaging the experience of business attorneys, valuation experts, financial advisors, and business brokers will aid in this undertaking.
A good place to begin the due diligence is by requesting to examine those books and records that Florida law requires businesses to maintain. Those records and the corporate formation documents can illuminate the manner in which the business has been operated and allow for verifcation of a seller’s representations.
Under Florida law, those buying into a business may rely on certain representations of a seller. However, whether that reliance is justified and to what degree it affects the buyer’s obligation to verify the information significantly impact the analysis. Relying entirely on a seller’s representations without verification is imprudent and may weaken any subsequent misrepresentation claims. Therefore, a better approach is to independently verify important representations.
Maintaining clear records in the transaction is also an important part of proper due diligence. Some key facts to record are the seller’s representations that significantly impact the buyer’s decisions. It is also equally important to clearly document the scope of the transaction for closing. By so doing, the parties will have a comprehensive understanding of the scope of the transfer.
A buyer’s start point should be to engage qualified business counsel. The Florida Bar recognizes those attorneys who are experts in business litigation with Board Certification. To attain this recognition, attorneys must try a certain number of jury and non-jury trials, pass a comprehensive exam, and receive satisfactory reviews from their peers and Judges before whom they have practiced. A complete listing of Board Certified attorneys in Business Litigation Law and other areas is available on the Florida Bar’s website at www.flabar.org.
By David Steinfeld, Esq.
Florida Bar Board Certified Business Litigation Lawyer
Martindale-Hubbell AV-Preeminent – Highest Peer Review Rating
View videos and other business law articles at www.davidsteinfeld.com