29 Oct Thinking About Buying Your Boss’s Business? Read This First  

Your Golden Opportunity?

You’ve been the right-hand man (or woman) for years. You know the business inside and out. The owner has started dropping hints about “slowing down” or “passing the torch.” Then one day, he looks you in the eye and says:

“I’d like you to take over the business.”

Your heart races. It feels like the dream you’ve been working toward has finally arrived. 

Ownership. Autonomy. Respect. Wealth.

But before you let emotion drive the bus, stop. 

Because many key employees who buy into their boss’s business end up saddled with debt, disappointment, and even lawsuits.   All because they didn’t protect themselves.

The owner has spent decades building this business. You can’t assume that his goals and yours are perfectly aligned. You also can’t assume he’s being 100% clear about what it will take for you to succeed. Sometimes, without even realizing it, owners “string along” loyal key people with vague promises that never materialize.

If you’re considering buying into, or taking over, the business, here are the critical questions and legal protections you must insist on.

1. Is the Business Really What It Appears to Be?

You may know the day-to-day operations, but do you know the financial guts of the company? Owners sometimes paint a rosier picture than reality. Before you sign anything, insist on:

Financial due diligence – audited financial statements, tax returns, debt schedules.

Customer concentration analysis – how much revenue is tied to just a few clients?

Hidden liabilities – pending lawsuits, tax issues, or regulatory concerns.  There may be industry-specific matter and liabilities you need to watch out for too.

Don’t just trust the story. Get the documents.

2. How Will the Deal Be Funded?

Chances are, you don’t have millions sitting in your checking account. That means either:

• A bank or SBA loan.
• Seller financing (you pay him over time).
• Some combination of the two.

If the owner insists on pure seller financing with no third-party lender involved, be cautious. In some cases, the seller doesn’t really put meaningful collateral at risk.  They may demand personal guarantees from you so that your house, savings, or future wages are at risk.  They may also retain “take-back” provisions that mean if you default, the seller repossesses the businesses AND keeps prior payments from you.  That means the downside is more on you than on them, even if they technically carry the seller’s note.

3. Protect Yourself From “Phantom Equity” Promises

Sometimes an owner dangles equity like a carrot: “Stick with me, and you’ll own a piece of this one day.” But unless it’s in writing, with clear terms and timelines, you’re just working harder without any real ownership.

Ask:

When do I actually get equity?

How is it valued?

What happens if I leave or the owner changes his mind?

Without answers in a binding contract, you’re vulnerable to being strung along.

4. Insist on a Real Transition Plan

Taking over the reins isn’t just about signing papers. You need:

Defined training and transition period – how long will the owner stay on?

Restrictions on competition – is he barred from starting a competing business?

Key relationships introductions – customers, vendors, bankers.

If the owner vanishes on day one, leaving you to juggle everything, you’ll be set up to fail.

5. Protect Your Downside

As the buyer, you’re the one betting your career and finances on this deal. You need legal protections, including:

Indemnification – if undisclosed problems pop up (lawsuits, unpaid taxes), the seller covers them.

Non-compete agreement – the owner can’t set up shop across the street.

Performance contingencies – if the business takes a nosedive due to pre-existing issues, you’re not stuck holding the bag.

6. Don’t Ignore Your Own Life and Finances

Buying into a business is not like buying a car. If the deal fails, you could destroy your financial future. Ask yourself:

How much personal debt or guarantees am I taking on?

What happens if revenue drops and I can’t make payments?

Is this truly the right opportunity . . . or am I just emotionally attached?

Being offered the chance to buy your boss’s business can feel like the opportunity of a lifetime. But it can also be a trap if you don’t structure it correctly.

Owners can mean well.  But their main concern is cashing out. 

Your concern must be protecting yourself. 

That means ironclad contracts, real due diligence, and making sure you’re not just being used as a convenient “exit strategy.”

Apply to Work With Us

At Garza Business & Estate Law, we help key people, investors and business owners evaluate opportunities and protect themselves.  If you’re a buyer, we protect you from being strung along with vague promises or being saddled with unfair deals. And we only work with a select group of clients who are serious about protecting themselves and investing in that protection.  No shortcuts.

If you’re being offered the chance to buy into, or take over, a business, don’t walk into it blind. Apply here to see if we’re the right fit: https://lgarzalaw.com/schedule-online/