Requirement for self-financed search

searcher profile

March 31, 2024

by a searcher from WHU-Otto Beisheim School of Management in Zürich, Switzerland

Dear Searcher Community,

I am planning to search by my own and invite investors to participate the upon acquisition. And I am also willing to put equity along with the Investors. In this form, do I need to form a formal legal entity during the Search Phase? Or I can set it up when there is more advanced with the Search?

Best regards,
Lingwei

0
6
177
Replies
6
commentor profile
Reply by a professional
from University of Michigan in Detroit, MI, USA
Hi ^redacted‌, Brad is right, there is no formal requirement. yet it doesn't cost a lot to setup a single-member LLC (via legal zoom etc.). And anytime you sign a contract during the search--for instance, a confidentiality agreement with a broker--you can have your LLC sign, thereby limiting your personal liability. Sure, the risk is small. But why not take advantage of the corporate form?
commentor profile
Reply by a searcher
from Northwestern University in Chicago, IL, USA
Brad and Hallam make good points. I did establish an LLC at the beginning of my search. In my state, it was $150 to establish and $75 to renew for the second year. Now I'm under LOI on a deal and I won't be using my old LLC to acquire the business. So the LLC wasn't necessary for me, other than perhaps giving me more credibility and reducing my risk in NDAs etc as Hallam mentioned. The cost is pretty low though, so you probably can't go wrong either way.
commentor profile
+4 more replies.
Join the discussion