Mergers and Acquisitions (Buying or Selling a Business) in California

Buying or selling a business is one of the biggest financial decisions an owner will make. The price is only part of the deal. How it is structured, what each side promises, and what happens after closing decide what you actually keep.

We guide buyers and sellers from the first letter of intent through closing, so there are no surprises later.

Talk to Us About Your Deal
  • Buyers and sellers
  • Clear fees agreed up front where possible
  • Serving businesses throughout California

How We Represent You in Your Deal

Letter of Intent

We shape the early terms on price, structure, timing, and exclusivity before you commit.

Due Diligence

We review the contracts, liabilities, taxes, and legal issues so you know what you are buying or disclosing.

Deal Structure

We help you weigh an asset sale against a stock or membership interest sale.

Purchase Agreement

We draft and negotiate the agreement, including promises, protections, and payment terms.

Closing

We prepare the closing documents and make sure ownership transfers cleanly.

Who This Is For

  • Owners preparing to sell, retire, or step away from the business
  • Buyers acquiring an existing business in San Diego or elsewhere in California
  • Partners buying out a co-owner or restructuring ownership
  • Licensed professionals selling or transferring a practice. Read: Thinking About Selling or Handing Off Your Practice?
  • Owners who want to get the business ready for a sale. See our Business Check-Up.
Keys to a small cafe business being handed to a new owner

What Is Really at Stake When You Buy or Sell a Business

For many owners, selling a business is the largest financial event of their working life. For a buyer, it is often the biggest investment they have made, frequently funded with a loan they have signed for personally. The number on the letter of intent gets the attention, but the terms around that number decide how much money actually changes hands, when it arrives, and who carries the risk once the deal closes.

Getting those terms wrong can cost you in several ways. Money can leak out through price adjustments, holdbacks and claims after closing. Time can slip away as a deal drags on or collapses in due diligence. Control can be lost when a seller stays on the hook for a note that is never fully paid. Relationships with employees, landlords, customers and even family members can strain when expectations were never put in writing.

For example, a seller agrees to carry part of the price as a promissory note, with no security and no right to step back in if payments stop. Two years later the buyer falls behind, and the seller has few practical options beyond a lawsuit against a business that may already be struggling.

Consider a common situation: a buyer closes on a San Diego business that depends on two large customer contracts, only to learn afterward that both contracts let the customer walk away after a change in ownership. The price assumed that revenue would stay.

A mergers and acquisitions attorney cannot remove every risk from a deal. What we can do is help you see where the risks sit, put them in writing, and negotiate terms that reflect what you are actually buying or selling. In many cases, that work matters as much to your final outcome as the headline price.

What Matters Most in a Deal

These are the terms that most often decide how a deal turns out. For a deeper walkthrough, read our guide: Buying or Selling a Small Business in California.

In an asset sale, the buyer picks specific assets and liabilities. In a stock or membership interest sale, the buyer takes over the company as a whole, including its history. Buyers and sellers often prefer different structures, and taxes play a big part, so we coordinate with your CPA.

These are the promises each side makes about the business. They decide who is responsible if something turns out to be wrong after closing, and for how long.

Part of the price may be held back or paid later based on performance. The terms decide when, and whether, that money is paid.

California generally does not allow non-competes, but the law makes an exception when an owner sells a business or their ownership in it. Read more: California Voids Non-Competes, With One Exception.

Who is offered a job, who is let go, and who is responsible for wages and benefits owed at closing.

A lease may need landlord consent to transfer, and some licenses and permits do not transfer automatically.

California Rules Worth Knowing

  • Unpaid sales tax can follow the business. In California, a buyer can become responsible for the seller’s unpaid sales tax unless part of the purchase price is withheld until the seller obtains a tax clearance from the state (CDTFA). Similar rules can apply to unpaid payroll taxes.
  • Bulk sale notice. Certain business sales require advance public notice to the seller’s creditors under the California Commercial Code. This is often handled through escrow.
  • Non-competes in a sale. A seller’s promise not to compete can be enforceable when it is part of selling the business or an ownership interest, if it is reasonable in scope.

Mistakes We Help Buyers and Sellers Avoid

Most deal problems we see are preventable, and they tend to show up in the same places.

  • Overlooking the lease. Many businesses can only operate where they are, and some licenses are tied to the location. If the lease cannot be assigned to the buyer, or the landlord will not agree to new terms, the deal can stall or fall apart. We review the lease early and negotiate the assignment or a new lease as part of the deal.
  • Sharing financials before a confidentiality agreement is signed. Tax returns, customer lists and pricing details are some of the most sensitive information a business has. Once they are out, you cannot call them back. A clear nondisclosure agreement, signed before anything is shared, can limit how a prospective buyer or competitor uses what they learn if the deal never happens.
  • Signing a letter of intent that skips the price mechanics. Many disputes start with an LOI that names a price but says nothing about working capital, inventory or how the number adjusts at closing. Those gaps get argued over later, when leverage has shifted. Settling the basic mechanics early can save weeks of renegotiation and a fair amount of goodwill.
  • Carrying a seller note with no security. Seller financing can help a deal close, but an unsecured promissory note leaves the seller as just another creditor. Security interests, personal guaranties, default terms and the right to receive financial reports can give a seller more options if payments stop. Lender rules may limit some of these, so structure matters.
  • Overlooking change-of-control clauses. Key customer contracts, vendor agreements, franchise agreements and commercial leases often require consent before ownership changes, or allow the other side to terminate. Buyers should confirm these before closing. Sellers who find and address them early can often present a cleaner, more valuable business.
  • Accepting open-ended indemnification. The promises a seller makes in the purchase agreement usually come with a duty to pay the buyer if they turn out to be wrong. Without sensible limits on amount, timing and small claims, a seller may face claims for years. Buyers, in turn, want enough protection to match the risk they are taking on.

How It Works

1. Talk to Us Early

Ideally before you sign a letter of intent, while the key terms are still open.

2. Letter of Intent

We help set the price range, structure, timing, and exclusivity.

3. Due Diligence

We review the business and flag issues that affect price or protections.

4. Purchase Agreement

We draft or negotiate the final agreement and closing documents.

5. Closing and Transition

We guide the transfer of ownership, funds, and the handoff after closing.

Closing table with purchase agreement documents and a pen

What to Have Ready Before We Talk

You do not need everything on this list for a first conversation, but the more you can gather, the more useful that conversation can be.

  • A short bullet-point summary of the deal as you understand it: the price, what is included, timing and anything else you have already agreed on
  • The letter of intent, term sheet or broker listing, if one exists
  • Three years of financial statements and business tax returns
  • Entity documents: articles, operating agreement or bylaws, and ownership records
  • Your commercial lease and any amendments
  • Key customer, vendor and franchise contracts
  • A list of employees, key roles and any written employment or bonus agreements
  • Business licenses, permits and professional licenses tied to the business
  • Existing loans, liens, equipment leases and any SBA loan terms
  • A short note on your goals: timing, price expectations and your role after closing

Working With Your Broker, CPA, Lender and Escrow

Most business sales involve a team, and we are glad to work within the one you already have. Your broker often finds the buyer and keeps momentum. Your CPA can advise on tax treatment and on how the purchase price is allocated among assets, a choice with real consequences for both sides. An SBA or bank lender will have its own requirements for the deal documents. Escrow handles funds, lien searches and the bulk sale process. Your insurance agent can help with coverage changes at closing. Our role is the legal side: drafting and negotiating the agreements, reviewing due diligence and keeping the documents consistent with what everyone agreed to.

Fees

We explain how the work will be priced before we start. Depending on the deal, that may be a fixed fee for defined steps, an hourly arrangement, or a combination. See our fees page for how we price legal work.

Common Questions

Answers to what owners ask most before buying or selling.

Before you sign the letter of intent. Many of the most important terms, such as structure and exclusivity, are set at that stage and are harder to change later.

Usually not, except for certain terms such as confidentiality and exclusivity. It still sets the direction of the deal, so it deserves a careful review.

It depends on the business, the liabilities, and the tax impact for each side. We explain the legal trade-offs and coordinate with your CPA on the tax side.

Yes. We coordinate with the other professionals on your deal so the legal documents match the business and tax plan.

It depends on the size of the business, how quickly information is shared, and any approvals needed. We will give you a realistic view once we see the details.

A seller who carries part of the price can ask for security, such as a lien on the business assets, a personal guaranty from the buyer, and clear default and cure terms. The note can also require regular financial reports. If an SBA lender is involved, the lender may require the seller note to be subordinated or restricted, so these terms should be negotiated with the loan in mind.

SBA lenders usually require a detailed review of the business, including tax returns, financial statements, a valuation and a signed purchase agreement they can approve. They often have rules about seller notes, seller involvement after closing and personal guaranties from owners. Requirements vary by lender and program, so we review the loan terms alongside the purchase agreement to keep the two documents aligned.

A cap is the maximum amount a seller can owe the buyer for breaches of the promises in the purchase agreement. A basket is a threshold that claims must pass before the seller pays anything, which keeps small disputes out of the process. Together with a time limit on claims, these terms help both sides understand how much risk each is carrying after closing.

Many owners benefit from starting one to three years before a sale. That window gives you time to clean up entity records, put handshake deals into written contracts, confirm the business owns its trademarks, software and other intellectual property, and address consent clauses in key customer contracts and leases. A business that is organized on paper often moves through due diligence faster and gives buyers fewer reasons to lower the price.

Related Guides and Services

Buying or Selling? Bring Us In Before You Sign the LOI.

Talk to Us About Your Deal

Or call 619-895-1066. Law Office of Christopher Scott-Dixon APC, 3130 5th Ave Ste 1, San Diego, CA 92103.

This page provides general information, not legal advice. Reading it or contacting the firm does not create an attorney-client relationship.

Scroll to Top