Before you start pursuing a deal to buy or sell a business, it is important that you and the other side are on the same page. The earlier you find out that there are fundamental differences between how you and the other side envision the deal proceeding the better.

Below are some important items that you want to make sure you discuss with the other party early on in the process to help the deal go smoothly. These terms, once they’ve been agreed upon, can then be put into writing in a Letter of Intent or formal offer.

1. The identity of the parties

The Seller should be the person or business entity that actually owns what is being purchased. On the other side, often an individual will create an entity during the transaction that will be the Buyer. It is important that the proper parties are involved and listed on the purchase documents, and that the individuals who have the ability to act on behalf of any entity are identified.

2. What is being purchased

The Buyer may want to buy the entire business entity (a Stock/Interest Purchase). Or they may only want to buy the operating assets of the business (an Asset Purchase). It is important that the parties know this at the outset, as it will impact the deal process.

3. Purchase price

The final price can change because of things turned up in Due Diligence, but you should have an initial agreement on the Purchase Price.

4. Payment terms

If anything other than the Seller receiving 100% of the Purchase Price is intended, this should be discussed up front. As an example, sometimes the Buyer is looking for Seller Financing to help with the funding of the purchase. Or the Buyer anticipates holding back a portion of the purchase funds until a date after the Closing.

5. Timing

Deals always take longer than the parties expect. However, a general timeline that includes a Due Diligence timeframe and a desired Closing is helpful to keep the deal moving. Any hard deadlines or periods when a party will be unavailable (such as for a planned vacation) should also be shared.

6. Exclusivity

Most Buyers don’t want the Seller to be working with another buyer while they are trying to work out the deal. Conversely, a Seller may want to increase the likelihood of selling their business by working with several potential buyers at once until they are ready to sign a Purchase Agreement. This issue should be discussed up front.

7. Transition details

Much of the success of a purchased business revolves on the transition from the Seller to the Buyer. You might not include details about the transition in the Letter of Intent, but it is never too early to start talking about it to ensure as seamless of transition as possible.

8. Any other important terms

There may be other issues that are important to you that can impact the deal. For example, the Seller may want the Buyer to promise to keep the current employees. Or the deal may involve the transfer of a permit or license which can only take place after the Closing, so provisions for the Buyer to operate the business until the transfer is complete should be discussed. If an issue is vital to whether you end up doing the deal, talk about it front to ensure the other side is aware of its importance.