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How To Investigate Any Business Opportunity
Buyer and seller meet with the settlement attorney at a predetermined time (after all conditions of sale
have been met). Documents are signed at the meeting by buyer and seller.
A good settlement attorney is also a good problem solver. He can help find creative ways to resolve dif-
ferences of opinion. The settlement attorney holds money in escrow and disburses it when all the appro-
priate documents are signed.
2. Escrow. In an escrow settlement, the money to be deposited, bill of sale and other documents are
placed in the hands of a neutral third party or escrow agent. The escrow agent is usually an escrow
company or the escrow department of a financial institution. Buyer and seller sign escrow instructions
that name the conditions to be met before completion of the sale. Once all conditions are met, the es-
crow agent disburses previously executed documents and disburses funds. There usually is no formal
final meeting at which the signing of the documents takes place. Buyer and seller usually sign them in-
dependently of one another.
A lien search is also performed by the attorney or escrow agent. This determines if any liens against the
business's assets have been filed in the records of the local courthouse.
Documents
A number of documents are required to close a transaction. The purchase and sale agreement is the
basic document from which all the documents used to close the transaction are created. The documents
most often used in closing a transaction are described below. Other documents not described below
may also be needed depending on the particulars of the transaction.
Settlement Sheet: Shows, as of the date of settlement, the various costs and adjustments to be paid by
or credited to each party. It is signed by buyer and seller.
Escrow Agreement: Is used only for escrow settlements. It is a set of instructions signed by buyer and
seller in advance of settlement that sets forth the conditions of escrow, the responsibilities of the escrow
agent, and the requirements to be met for the release of escrowed funds and documents.
Bill of Sale: Describes the physical assets being transferred and identifies the amount of consideration
paid for those assets. It must always be signed by the seller and is often also signed by the buyer.
Promissory Note: Used only in an installment sale, it shows the principal amount and terms of repay-
ment of the debt by the buyer to the seller. It specifies remedies for the seller in the event of default by
the buyer. It is signed by the buyer and the buyer often must personally guarantee the debt.
Security Agreement: Creates the security interest in the assets pledged by the buyer to secure the
promissory note and underlying debt. It also sets forth the terms under which the buyer agrees to oper-
ate those assets which constitute collateral. It is used only in an installment sale. It is signed by both par-
ties.