What to look for when buying or selling a business in NYC

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Businesses make the world run.  They are assets that give rise to jobs, money, innovation, growth – any number of other amazing products that you can think of.  For the people behind the business, buying and selling them are ways to leverage the opportunity.  If you’re buying or selling a business in NYC, check out this guide to some of the things that you should consider. 

What kind of business structure is there, if any? 

Under the laws of New York, a business can operate in several ways.  Often, the type of business will have dictated the choices made by its founders.  One of the first things to consider when buying or selling a business in NYC is to understand the kind of business entity that you are buying or selling. 

What kind of business entity are you buying or selling?

Generally speaking, many businesses in NYC will operate under one of the following structures: a sole proprietorship, a partnership, a corporation, or a limited liability corporation.  There are other variations, but many businesses will fall under one of these categories. 

It’s important to know what the business structure is because each of these kinds of structures present different kinds of liabilities.  For instance, if someone is operating as a sole proprietor, they are they business.  That is, all profits, as well as all liabilities, run directly to the person.  Compare this to a corporation, where profits go to the corporation, and officers and shareholders are (generally) insulated from liability. 

What licensing requirements, if any, exist for the business you’re buying or selling? 

Another question to ask when buying or selling a business in NYC is whether the type of business requires any kind of license to operate and, if so, what are the requirements to maintain or transfer that license. 

For instance, I’m a lawyer.  To perform legal services as a lawyer, I must be licensed by the State of New York.  If I were to sell my legal practice, I might be able to sell my client book of business (names, numbers) to you, but you could not perform any legal services.  Thus, selling my law practice to you might not be a good investment for you. 

Another example might be a grocery store.  The business might be constituted of all of the inventory, cash register, employees, a lease to a store, and the goodwill that the store has created over time.  Someone looking to buy that grocery store can apply for their retail license, and so this may be a good opportunity.   

The bottom line is that it’s important to look at any licenses that may be required to operate the business, whether the license may be transferred, or how challenging it might be to obtain that license for yourself. 

Who are the people involved in the business? 

Another issue to be aware of if you’re thinking about buying or selling a business in NYC is to investigate who might be involved in the business.  As mentioned previously, a business can look like many different things.  If you’re buying a business that was being run as a general partnership, you have to be sure that you have been dealing with all the partners involved.  A request to look at any partnership agreement might assist with this. 

If you’re looking to buy a corporation, you have to examine who the officers of the corporation are, whether corporate formalities have been fulfilled, and whether there are any shareholders.  For smaller businesses, an examination of the business’ Articles of Incorporation, Bylaws, and tax returns might help to reveal this information. 

By purchasing or selling a business when it’s unclear who was involved in the business might leave you exposed to liability, whether it’s a business partner or shareholder suing. 

Does the business have any tax liabilities? 

Another area that is critical to investigate when buying or selling a business in NYC is whether there are any outstanding tax liabilities.  Talk to most people on the street, and it seems as if everyone has a way to “cook books.”  You can rest assured, however, that if you’re buying or selling a business that has tax liabilities, someone will be paying that liability.  If you’re seller on that transaction, not being aware of tax liabilities may leave you subject to unwanted law suits after the closing.  If you’re the buyer of a business and didn’t do your homework on the tax liabilities of the business, you may have just bought a tax bill. 

What kinds of documents should you examine when buying or selling a business in NYC?  As it relates to federal taxes, order account transcripts.  Account transcripts are the IRS records of tax returns after they have been processed.  Account transcripts will show how the IRS processed the tax return, as well as include any liability outstanding for the tax year requested.  Concerning NYS taxes, the parties have to prepare and file a bulk sale notice.  This form is sent to the NYS Department of Taxation and Finance along with a copy of the contract.  After review, the Bulk Sale Unit will send out a letter advising if any tax liabilities exist. 


Whether you’re thinking about buying or selling a business in NYC, there are lots of issues that each side should consider before going into contract and closing.  You want to investigate the structure of the business so that it’s clear what is being bought or sold.  You also want to look at what, if any, licensing requirements exist to own and operate this particular kind of business.  Still further, you want to learn who are the parties involved, and whether the purchase or sale has been properly authorized by relevant parties.  Finally, you want to be in the know as to any tax liabilities which may affect the business. 

This guide is by no means exhaustive, but hopefully provides helpful insight into things to consider before buying or selling a business.  If you are thinking about buying or selling a business in NYC, it’s a good idea to have a lawyer guide you through the process.  If you would like to know more about buying or selling a business in NYC, contact the Law Office of Richard Kistnen, (718) 738-2324 or email [email protected]

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