Posted on April 24, 2009 in Business Law
A business owner who is considering a sale is usually busy keeping the business running smoothly and so stopping to organize for a sale can seem like a daunting task.
The following is a list of considerations for the would-be business owner to print, ponder, and use as a guide. This list can also serve as a guide for the potential buyer.
- What is your timeframe? Do you want to sell the business as soon as possible after it is put on the market or do you want to bring someone in as an employee or independent contractor first? How long do you have to get the business ready for scrutiny by potential buyers?
- How will you advertise the sale? Whether through journals, internet ads, word of mouth, at college placement offices or print ads, you will need to decide where you will find potential buyers and how long you expect it to take.
- Organize your financials. Although you will not need to have the financials “buyer-ready” at the initial stages, you should think about how you are going to prove the net worth of the business. You should have your prior years’ tax returns accessible and organized, as well as any bank account statements and bookkeeping reports that exist.
- What are my assets and liabilities? In preparation of the sale you will need to organize your payables, receivables, and bad debt. You will need to have a list of long-term debts and receivables as well as monthly expenses. Does your business have any pending or potential claims, judgments or lawsuits against it, or in its favor?
- Do you need to have your business evaluated? A business attorney may be able to help you determine how to value your business or may suggest a referral to a company or individual who is skilled in business appraisal and valuation.
- What about the physical location? If you own the premises on which the business is located, you should decide whether you are going to sell the real estate, lease to the new owner, or ask the new owner to relocate. If you are going to lease, you will need a lease between yourself and the new owner.
- What about legal aspects of your company? Depending on whether your business is a sole proprietorship, corporation, partnership, LLC or LLP, you may need paperwork drafted for your business and tax records, and may need certain documents filed at a state, federal or local level.
- What, exactly, are you selling? Are you selling your business name, assets, customer lists? What items and furniture are going with the sale and which are not?
- Transfers and such. Accounts and utilities will need to be transferred. Some may require specific documentation to do so.
- Special considerations. You may have specific regulations that you must follow if you, or your business, is licensed by the state or federal government or by a regulatory agency. You will also want to structure the sale in such a way that tax obligations and consequences are minimized.
- Dealing with the current situation. How will you deal with current customers or clients? When will your employees or independent contractors be told of the pending situation? Will you need to make any special provisions for the records and documents of your current customers?
- Should I stay or should I go? Will you stay on to work or consult? If so, for how long and will you expect compensation for your work? You may need a separate legal document detailing your arrangements.
- Financing. Will you owner-finance all or part of the sale? If so, how will you deal with and define “default”? What will be the terms of the financing?
It is a good idea to see a business lawyer at the beginning of the process. A qualified business lawyer can make the procedure go much more smoothly, negotiate with potential buyers, draft and file all documents needed at every step of the process, help you comply with any state and federal regulations, transfer property and accounts, and attend and supervise the “closing.”
An early consultation with a business attorney can help assure that things are done in the most efficient manner possible, maximizing benefits and minimizing stress for all parties.
Bob Kalish is the founding partner of the Kalish Law Office, and has been representing both buyers and sellers as well as other business clients since 1984. He can be reached by email at firstname.lastname@example.org. The firm’s website is www.kalishlawtexas.com and the telephone number is 281-363-3700. The Kalish Law Firm is located in The Woodlands, Texas, north of Houston.
So you own a business and are considering selling it? This article can serve as a preliminary “checklist” to help you organize your thoughts.
This list can also serve as a guide for a potential buyer.