1. Company Approval Comes before Contract Execution
A signed agreement may create obligations even if internal approval is disputed. Before committing, identify the entity type, the signer's authority, and any required votes.
Directors and Officers Have Different Authority
Business Corporation Law § 701 generally places corporate management under the board's direction, subject to exceptions. Under § 715, bylaws or board action can define officers' authority. Before an unusual transaction, check the bylaws, delegations, and resolutions rather than relying on an executive's title. See the separate resource on board of directors meetings.
LLC Authority Depends on Management and Agency Rules
Limited Liability Company Law §§ 401, 412, and 417 distinguish management structures and require a written operating agreement. In a member-managed LLC, ordinary-course acts can bind the company under § 412, subject to exceptions involving knowledge and authority. Membership alone does not confer agency power in a manager-managed LLC. Check the articles, operating agreement, and relevant authorization.
Significant Asset Transfers May Require an Additional Vote
Business Corporation Law § 909 requires board authorization and shareholder approval for dispositions of all or substantially all assets outside ordinary business. Voting thresholds depend on statutory circumstances. LLC Law § 402 sets default voting rules for comparable major transfers, subject to operating agreements and transitional provisions. Confirm the required approvals before closing.
2. Contract Clauses Should Reflect Specific Business Risks
A contract should state what each party must deliver, what happens if performance slips, and how the parties allocate losses. Standard clauses deserve the same attention as price.
Payment Terms and Acceptance Criteria Need Clear Triggers
Define delivery, acceptance, completion, and payment milestones. Specify how customers report defects and suppliers may cure them. General Obligations Law § 5-701 requires signed writings for certain agreements, including some guaranties and promises that cannot, by their terms, be performed within one year. Not every unwritten business agreement is unenforceable.
Indemnification and Liability Caps Do Different Work
An indemnity allocates specified claims or losses; a liability cap limits covered exposure. Check whether the cap covers indemnity claims, its exceptions, and obligations surviving termination. Contractual exclusions may not defeat statutory duties or third-party claims. Related commercial contracts guidance covers broader drafting issues.
Exit and Dispute Terms Should Match the Transaction
Define material breach, notice, cure periods, and termination consequences. Governing-law, forum-selection, and arbitration clauses answer different questions. Consider practicality, mandatory legal limits, and enforceability. Naming a court does not by itself establish jurisdiction.
3. Transaction Structure Changes the Liability Review
Before relying on liability exclusions, determine whether the purchase concerns assets, equity, or another structure. That choice changes the diligence needed.
Asset Purchases Do Not Necessarily Cut Off Past Claims
An asset purchase generally does not transfer the seller's liabilities automatically. Exceptions include express or implied assumption, de facto merger, mere continuation, and fraudulent transfers. A contract's exclusion language cannot necessarily defeat those claims. In an equity purchase, the acquired entity generally retains its obligations; buying shares alone does not make the shareholder liable for each debt. See asset purchase agreement guidance for transfer documentation.
Sales Tax Clearance Deserves Its Own Closing Step
Review tax assessments, liens, leases, litigation, permits, and required consents. For a covered bulk sale, purchasers must file Form AU-196.10 with the New York Tax Department at least ten days before paying or taking possession, whichever occurs first. Follow the department's response before releasing funds; noncompliance can expose buyers to unpaid sales and use taxes. An ordinary stock sale without asset transfers is generally not a bulk sale.
4. State Filings and City Permissions Require Separate Review
Formation does not authorize every business activity or property use. Verify registrations and premises-specific permissions separately.
Richmond County Identifies the Corporate Office Location
New York corporations file certificates of incorporation with the Department of State. For an office in Staten Island, the certificate lists Richmond County, without creating separate corporate rules. In acquisitions, check the entity's filing status and whether registrations need updating.
The Premises Must Support the Proposed Use
NYC licensing depends on the activity; the NYC Business portal helps identify potentially relevant permits. Before leasing or buying premises, check zoning and the Department of Buildings' Certificate of Occupancy. Changes in use, exits, or occupancy may require an amended certificate. Qualifying older buildings may use a Letter of No Objection. Separate land use and zoning guidance addresses broader property rules.
Federal Rules Apply Only When Their Conditions Are Met
Federal law addresses distinct risks rather than replacing state entity law. Sherman Act § 1 (15 U.S.C. § 1), for example, may apply to unlawful competitor agreements restraining interstate commerce. Coverage depends on the conduct and commerce involved.
5. Dispute Preparation Starts with the Transaction File
A transaction file should show who approved the deal, what the parties promised, and what occurred after signing. These records may matter if a dispute arises.
Preserve Evidence of Authority and Performance
Keep signed agreements, amendments, approval records, relevant emails, invoices, inspections, and notices. Document changes as they occur. When litigation is reasonably anticipated, preserve relevant materials rather than relying on routine deletion schedules. Missing records can complicate proof.
Court and Filing Rules Depend on Jurisdiction and Venue
Commercial disputes may proceed in Richmond County Supreme Court when jurisdiction and venue are proper. CPLR § 503 considers party residence and where substantial events occurred. The Civil Branch generally requires filing through NYSCEF with the Richmond County Clerk, subject to case-type and self-representation exceptions. Filing does not replace service of initiating papers. Richmond County lies within the federal Eastern District of New York, but federal subject-matter jurisdiction and venue require separate analysis.
21 Oct, 2026
