<\/span><\/h2>\nA contract can determine who carries financial risk when circumstances change.<\/p>\n
Before signing, examine provisions dealing with representations and warranties, indemnities, conditions to closing, termination rights, liability limitations, dispute resolution, and obligations after completion.<\/p>\n
Consider a simple example. A seller represents that there are no significant undisclosed liabilities. The agreement should specify what happens if that statement proves inaccurate. The wording of the contract can affect the investor’s ability to seek compensation or another remedy.<\/p>\n
Do not assume that an informal promise will provide the same protection as a clearly drafted contractual provision.<\/p>\n
Where a transaction is substantial, having a qualified lawyer review the relevant documents before signing can help identify obligations or protections that may not be apparent to a non-lawyer.<\/p>\n
<\/span>Tax Due Diligence Can Change the Investment Calculation<\/span><\/h2>\nTaxes can affect both the cost of acquiring an investment and its future returns.<\/p>\n
Depending on the transaction, relevant issues may include:<\/p>\n
\n- Income or corporate taxes<\/li>\n
- Capital gains taxes<\/li>\n
- Property-related taxes<\/li>\n
- Transfer or registration taxes<\/li>\n
- Withholding obligations<\/li>\n
- Sales or value-added taxes<\/li>\n
- Tax losses and credits<\/li>\n
- Unpaid historical liabilities<\/li>\n<\/ul>\n
Tax treatment varies significantly by jurisdiction and transaction structure. A property purchase, acquisition of company shares, asset purchase, and investment in a partnership may produce very different tax consequences.<\/p>\n
Do not rely on a general assumption that an investment’s advertised return represents the amount you will actually retain. Ask a qualified tax professional to assess the transaction based on the applicable law and your circumstances.<\/p>\n