Buying or Selling a Business in Arkansas: Legal Guide

Posted: April 16, 2023

Buying or selling a business in Arkansas is one of the most important financial transactions an entrepreneur can undertake. Whether you are acquiring your first company, preparing to exit a successful venture, or restructuring an existing enterprise, these deals require careful legal, financial, and tax planning. Working with experienced Arkansas business attorneys ensures that your transaction is protected, compliant, and structured for maximum value.

At McDaniel Wolff, PLLC, our mergers and acquisitions (M&A) lawyers regularly represent buyers and sellers across Arkansas. We assist with asset purchases, stock sales, mergers, spin-offs, and complex tax-deferred rollovers.

Please contact any of our featured attorneys on this page if we can assist you with a transaction, or submit an inquiry online.

Why You Need Legal Counsel When Buying or Selling a Business

Business transactions involve more than a handshake and a check. Each transaction requires tailored agreements, due diligence, and negotiations. An Arkansas business attorney helps:

• Structure the deal to minimize liabilities and taxes.
• Negotiate key terms to protect your financial interests.
• Draft and review contracts to avoid costly disputes.
• Guide the process from Letter of Intent (LOI) through closing.

What are some initial steps that should be taken prior to purchasing or selling a business?

One of the first steps in buying or selling a business is to retain the right advisors to assist you with the process. With the sale of a business, three types of advisors are typically involved:

• Legal Counsel – Your attorneys will assist you with structuring the transaction, negotiations over legal terms, drafting contracts, the due diligence process, and the closing. Legal counsel will ultimately assist in getting the deal from LOI to closing.

• Accountants – Your accountant or CPA typically assists with the tax and financial aspects of the transaction. Transactional CPAs can assist with the preparation of financial statements for presentation to a potential buyer and the financial due diligence process. They can also consult with you to make sure there are no hidden tax issues.

• Investment Bankers / Business Brokers – If you are unable to locate buyer on your own, a broker can assist in finding one. Brokers can also provide significant value by assisting with the determination of your business’s fair market value and getting the transaction to closing by using their experience in negotiating key deal points.

What are some of the key legal documents needed for the sale of a business?

Depending on the nature of the business and the complexity of the proposed transaction, the number of legal documents required may be many or just a few. Some of the legal documents common to most transactions include:

• Confidentiality Agreement – A confidentiality agreement, also known as a non-disclosure agreement (or NDA for short), is a legally binding contract that protects the confidential information of the seller. The buyer agrees not to disclose any confidential information to third parties (or improperly use such information) without the seller's permission. The presence of this agreement facilitates an open exchange of information between the seller and buyer so that deal terms can be negotiated.

• Letter of Intent (LOI) – Once primary transaction terms are tentatively agreed upon, the parties typically enter into an LOI. An LOI is a non-binding document that outlines the basic terms of the sale, such as the purchase price, the closing date, and the terms of financing (if any). Although it typically cannot be enforced in court, an LOI serves to document the parties’ common understanding of high-level deal terms prior to incurring significant transaction costs.

• Purchase Agreement – The purchase agreement is the primary, legally binding contract that sets forth the terms of the sale in detail. The purchase agreement is a highly negotiated document that should always be prepared by experienced M&A counsel. Depending on the type of sale, a purchase agreement can be drafted to reflect a sale of business assets (an Asset Purchase Agreement) or the sale of business equity (in the case of a corporation a Stock Purchase Agreement, or with an LLC, a Membership Interest Purchase Agreement). The purchase agreement is a critical document for a variety of reasons, but perhaps most importantly it will allocate liabilities between the buyer and seller.

• Post Closing Employment Agreements and Non-Compete Agreements – Often a buyer desires for the seller to retain a temporary role with the business after the closing to assist with transitional matters. This relationship is often governed by an employment agreement. A non-compete agreement is a legally binding contract that prevents the seller from competing with the buyer in the same industry for a specified period of time after the closing. These agreements are commonly signed at the closing of a transaction.

Common Mistakes to Avoid in Business Sales

Selling or buying a business is a complex process, and even small oversights can lead to costly disputes or lost value. Here are some of the most common mistakes we see in Arkansas business transactions:

1. Failing to Conduct Full Due Diligence

Many buyers rush into a deal without carefully reviewing financial statements, contracts, tax records, or pending litigation. Skipping thorough due diligence can result in unexpected liabilities after closing.

2. Misvaluing the Business

Whether you’re a buyer or seller, improperly valuing the business can derail negotiations. Relying only on revenue multiples or informal appraisals instead of professional valuation methods may cause you to overpay — or leave money on the table.

3. Overlooking Liabilities and Hidden Obligations

Unpaid taxes, unresolved debts, unrecorded liens, or long-term contractual obligations can surprise an uninformed buyer. Sellers should disclose all obligations, and buyers must ensure these are identified and addressed in the purchase agreement.

4. Ignoring Employee and Contractor Issues

Business value often depends on its people. Failing to review employment contracts, benefits, and compliance with labor laws can cause disruptions after the sale. Buyers should confirm that key employees are retained, and sellers should plan for smooth workforce transitions.

5. Poor Tax Planning

Many sellers underestimate the tax consequences of a sale. Whether structured as an asset purchase or a stock purchase, the transaction has very different tax outcomes. Without advance planning, sellers may face unexpected capital gains, and buyers may lose valuable deductions.

6. Using Generic or Incomplete Contracts

Relying on template agreements or handshake deals is a recipe for future disputes. Every transaction is unique, and contracts must clearly outline terms such as purchase price, representations and warranties, non-compete clauses, and dispute resolution mechanisms.

Protect Your Transaction with an Experienced Arkansas M&A Lawyer

Whether you’re buying a business in Central Arkansas, selling a company in Northwest Arkansas, or exploring merger opportunities in Northeast Arkansas, our attorneys provide tailored legal strategies to protect your investment and achieve your goals.

Call McDaniel Wolff, PLLC at (501) 954-8000 or contact us online to schedule a consultation.