Business
If you operate a business company in the United States, you have access to an enormous market with a great number of solvent customers. Not less important is the fact that you can find some fantastic fundraising opportunities in America. In accordance with the law, citizens of other countries can own American-based companies. If you are not an American citizen and you would like to have a company registered in your name in the country, you have two options to choose from:
- You can register a new company; or
- You can buy an existing company.
Each option has its pros and cons. Whichever of them you choose, some investments are going to be required. The investment amounts may be different and the investment objects may be different as well. In any case, you can start a company to do business in any sphere in America and you can buy a company that does business in any sphere.
In addition to that, you can qualify for a long-term visa to the United States whichever option you choose.
Starting a company from scratch may look attractive: you are free to choose the type of company to set up, the geographical location, the management structure, and so on. These factors are important without doubt but buying a ready-made business also has some serious pluses.
Advantages of buying a ready-made business
Let us consider what advantages you can find if you decide to buy an existing company instead of starting a new one. A company that has been in existence for some time will have:
- Tested and put into practice some business ideas;
- Acquired the licenses and permits required for carrying out its business activities;
- Developed its own know-how that has a commercial value and brings good results;
- Built up a network of clients and suppliers;
- Learned all the tricks characteristic of the business area.
In other words, when buying a company, you get a functional mechanism. When starting a new company, on the other hand, you have to teach the mechanism how to function before it starts bringing profits.
A foreigner can buy a business in the USA: it is legal. If you believe that starting a new company in America would not be as advantageous as buying an existing one, you will benefit from the information below.
What can you do to buy a company in the USA?
If you have decided to buy a company in America, you have to choose from two types of deals that you can make:
- You can make a share deal, which means that you can buy company ownership rights; or
- You can make an asset deal, which means that you can buy some or all of the company assets.
Let’s briefly discuss both of these options.
Share deal
When making a share deal, you simply purchase some shares of an American corporation if this is the company ownership form. If it is an LLC, you purchase a portion of the company.
Your company ownership rights allow you to obtain profits in the form of dividends or a portion of the LLC income. In addition, you can participate in company management voting at General Meetings or discussing the strategies with the co-owners of an LLC.
Your company ownership share will also determine the share of the company assets that you own.
Another thing you should remember is that mergers and acquisitions are also possible. If you are a business company owner, you can merge with an American company or acquire it. Similarly, you can use your American-registered company to acquire the company in your home country.
Asset deal
When you make an asset deal, you do not purchase the company. Rather, you acquire property rights for the assets of the company. Therefore, you do not become the owner of the company but you become the owner of the assets.
Assets can be movable and immovable. Movable assets, in their turn, can be divided into material assets (computers and manufacturing equipment, for example) and non-material assets (such as patents, copyrights, and trademarks). Land and buildings are classified as immovable assets or as real property.
When making an asset deal, you have to clearly understand what assets you need and how you are going to use them.
So, should you buy a company or should you buy assets? The answer will depend on your central business objectives. Let us briefly discuss the key advantages that each of the options can bring.
Advantages of making a share deal
The main advantages of buying a company instead of the company’s assets include the following ones:
- Purchasing a share of the company ownership simultaneously means purchasing part of the company’s assets;
- You don’t need to apply for any licenses or permits and you don’t need to sign any new agreements with suppliers/ customers: the company that you are buying already has all the necessary legal instruments for doing business;
- You save on taxes associated with buying assets;
- Withdrawing from this type of investment is going to be less problematic if you want to do so: selling a whole company is easier than selling many separate assets.
As the new company owner, you will also be able to optimize its operations and make it more profitable than it used to be before.
Advantages of making an asset deal
What advantages can an asset deal bring to you as opposed to making a share deal? The key advantages include the following ones:
- When making an asset deal, you are not assuming the risks associated with the company’s activities. In particular, you can avoid various legal obligations that the company has and possible lawsuits.
- You can choose and buy only the assets that you need.
- Consequently, you can save money because you can avoid buying what you don’t need.
As you can see, most of the advantages that the two options have are mutually exclusive. Depending on what’s on offer at the current moment, you may have some tough choices to make.
When you have made your choice, you can launch the company/ assets purchase process. What legal instruments do you need for that?
Legal instruments involved in purchasing a company in the USA
Both the seller and the buyer will want the deal to be lawful. For this reason, both parties are going to involve legal assistants in the process.
Before the negotiations start, a nondisclosure agreement needs to be signed. In addition, you will have to issue a Letter of Intent.
Depending on what you are buying, you will have to negotiate the terms and conditions of the share purchase agreement or the asset purchase agreement that you are going to make. Before making the deal, you have to ascertain that the business you are buying is perfectly ‘clean’. Legal, fiscal, financial, technical, and other inspections are required. In other words, due diligence checks need to be conducted. In different cases, the inspections can be more or less scrupulous.
The goal of the due diligence procedures is finding, assessing, and minimizing various risks. It is important to note that the results of the inspections can have a direct bearing on the final price. If you are satisfied with the results of the due diligence procedures as well as the price, you can close the purchase deal.
To conclude, we would like to emphasize that legal support is crucial in the process of buying a company in America. Please do not hesitate to apply for professional assistance.
