Selling A Business Involves Far More Than Attending A Closing
Every business is the owner’s “baby,” who is nurtured from birth, raised through good times and bad, who provides great joy and fulfillment, but will someday belong to someone else.
Selling a business is one of the most momentous events in a person’s lifetime, and, except for “serial entrepreneurs,” it is a process that most business owners face only once. And, because a business is often a person’s most valuable asset, the process of selling demands the utmost in care.
Chipman Mazzucco Emerson LLC has helped owners sell countless enterprises, ranging from mom-and-pop operations to sprawling companies worth tens of millions of dollars. Our lawyers have the experience to guide owners from when they form the decision to sell to when they leave the closing with a check.
No two businesses should be sold in exactly the same way. Individual circumstances always come into play. Nevertheless, some general steps apply in most cases.
Should I Sell?
Sooner or later, practically every business owner wants to step aside. Whether because of age, illness, financial need or too many seven-day workweeks, many business owners will want to let someone else take charge of their business.
When no partners, key employees or family members are available to assume control, a third-party buyer may be the answer. The buyer could be an investor seeking the best return for his or her capital, but the buyer is more likely to be someone in the same industry or an allied industry who can combine enterprises for maximum financial benefit.
How Do I Get My Business Ready?
Before putting a house or car on the market, the owner would normally tidy it up and make it look attractive. So it is with businesses. Although the precise tasks will vary from company to company, here are common housecleaning tips:
- Bring all corporate or LLC minutes and resolutions up to date.
- Obtain federal registrations for all trademarks and slogans used in promoting your goods or services.
- Secure patents for any essential technology.
- Firm up all contracts with key suppliers and customers.
- Firm up leases for any facilities used in the business.
- Secure employment agreements with key employees, including clauses prohibiting them from competing with your business or soliciting your customers.
- Secure agreements with all employees not to disclose confidential information.
- Be certain that your state corporate or LLC filings are current.
- Ensure that all tax returns are truthful and accurate and pay all taxes, especially sales taxes, when due.
- Make sure your employee handbook is complete and up to date.
- Review all financial statements with your accountant to make certain that they comply with generally accepted accounting principles and fairly and accurately reflect the financial condition of your business. Reverse the effect of personal expenditures or cash receipts that may not have been fully reflected.
How Much Is My Business Worth?
Before you put your business on the market, you should know what it is reasonably worth. After taking all the steps to get your company ready for sale, consult a valuation professional. He or she may have additional tips to make it even more profitable and valuable.
How Do I Find A Buyer?
Some sellers will begin to negotiate with the first person who expresses interest without having been solicited. Such a buyer often operates a company in the same or complementary industry. If the seller does not expose his or her business to a broader market, however, then the risk arises of selling the company at an unfairly low price. An investment banker or business broker can expose your business to a broader market.
Am I Selling My Company Or Its Assets?
A threshold question is how to structure the sale. Many factors come into play, but the sale of a company, as opposed to the sale of its assets, can have dramatically different consequences for the income tax and the liability aspects of the transaction. Tax and legal advisers are essential when sellers confront this issue.
What Do I Need To Know About My Contract Of Sale?
Virtually every sale is governed by a contract of sale. The seller’s principal focus is usually to make certain to receive payment at closing. The buyer, however, will typically want representations and warranties from the seller about the condition of the business. If any turn out to be inaccurate, the seller may have to indemnify the buyer from loss. Sellers must be careful about all provisions in the contract that could lead to an erosion of the purchase price. A range of other provisions can also harm the seller, so the seller must view the agreed purchase price as merely the start of any negotiation with the buyer over the terms of the contract.
What Will The Closing Be Like?
If the seller and relevant advisers take all the proper steps, the closing should be completely anticlimactic. If not, the closing can become an angry and anxiety-filled event when issues ignored along the way come back to haunt the parties.