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TRUMP UNIVERSITY WEALTH BUILDING 101

Price and Terms

These include the price of the business, the down payment, the fi nancing
terms, and the deal structure. For example, in cases where there is a customer
concentration issue, business is declining, or there is the “promise” of a big
contract, the deal can be structured as a performance-based purchase or earn-
out, which means the seller gets a premium for certain events that materialize
or continue after you take over.

What Assets Are You Buying?

Be clear about what assets come with the purchase of the business, and if
they’re “free and clear,” including equipment, company web site, patents,
copyrights, and others, and any other intangible assets.

Asset or Stock Sale

Unless the deal involves the transfer of specific business licenses or contracts,

structure the deal as an asset purchase and not as a stock sale. You can then
“step up” the assets and depreciate them again, which is a major tax advan-
tage, and also avoids any liability you would inherit in a stock purchase.

Noncompete

This clause prevents the seller from going back into business and competing
with you for a certain period of time and distance.

Customer or Supplier Concentration Issues

You will need protection and a remedy to deal with these issues. As described
in “Price and Terms”, earnouts are a great mechanism.

Lease Transfer

The lease must be transferred to you on terms that are acceptable, which is
especially important if the business relies on its location to generate revenue.

Due Diligence

Give yourself enough time to inspect the company’s books and records, and con-
duct a thorough review of the business. Usually 20 business days is adequate.

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