There are over 1 million employer firms in the United States! Are you ready to sell yours?
Selling your business can be a complicated and confusing process. There are many things to consider such as how much money you want to make, who will run the company after it is sold, and what legal issues need to be taken care of before the sale takes place.
In this post, you will find out how to sell your business, what you need to consider when selling and how to avoid some common legal mistakes.
How to Sell Your Business
When you are selling a business you cannot get away from the legalities involved. There are certain documents that you are going to need to quickly sell your business.
The first document that you will need is a letter of intent. Your letter of intent outlines all the assets and shares the business possesses.
There are two types of letters of intent. The first one is binding and the other is non-binding. A non-binding letter of intent means that either party can decide not to go through with the agreement.
A binding letter of intent gives both parties an obligation under the law to go ahead with the deal.
Another important legal document that you need to have when selling a business is a non-disclosure agreement. Non-disclosure agreements are necessary because they will prevent the person who buys your business from disclosing information that you consider confidential as a seller.
This document is necessary because someone who is about to buy your business will be exposed to your trade secrets and other important information about how you make money.
A non-disclosure agreement prevents them from telling anyone about what they learned during the time they were inspecting the business.
When it comes to crafting a letter of intent and a non-disclosure agreement it is best to get help from a lawyer so that you don’t overlook any legal issues.
Know the Value of Your Company
You should carefully evaluate the value of your company with your accountants by looking at the past and present financial performance of the business.
You should also consider how much money you want to make with the sale. Your discussion with the buyer should include considerations about whether you would like to retain part ownership or sell all equity.
To decide if you want to be a part-owner or not you will need to consider your motivations behind the sale. Be sure to have a legitimate discussion of the terms with the buyer and do not assume anything unless you have spoken about it in detail with them.
If any of this seems unclear or overwhelming, talk with a qualified attorney who can provide you with legal advice.
Clear the Table
Make sure there are no pending lawsuits or taxes due. A good lawyer will be able to help you understand all equity agreements and intellectual property licenses that may need to be finalized during your agreement.
Having pending lawsuits and taxes can be a deal-breaker for your sale. If it is possible settle your lawsuits out of court quickly and contact the IRS about clearing up your taxes if you are thinking about selling your business. No one wants to buy a business where they will have to deal with these types of financial burdens.
Your lawyer will help you craft your purchase agreement with your buyer. A purchase agreement will contain all the terms and conditions of the sale of your business. The agreement will outline the status of items in your business such as the inventory, employees, contracts, financial statements, taxes, and lawsuits to name a few.
Be Fair to Current Employees
Ensure that any employees that will be terminated are aware of this. Make sure that you are legally able to release people from their contracts by contacting a lawyer. If you break contractual agreements in any way you could find yourself with lawsuits on your hands.
If the employees will be staying on make sure that you negotiate with the new owner so that they can remain at their current salary. If the new owner cannot retain them at that rate then lawyers need to be brought in to help negotiate new rates and benefits.
The bottom line is that when you sell a business you must consider the needs of employees carefully to avoid lawsuits.
Timing Is Everything
Many people do not realize how long it can take to sell their company. You should create a timeline for the process and let all stakeholders know what the plan is upfront. This way there are no surprises or frustrations that can arise when deadlines are not met on time.
To make sure you have enough time, start early and give yourself as much time as possible. You will also want to be prepared at all times for negotiations over all aspects of the sale process including price range and buyer type.
As mentioned before you need to understand your motivations behind selling because this will affect who could potentially purchase your company, and how quickly it sells.
Get Ready to Sell
Selling your company is a big decision and you need to know exactly how to sell your business so that you will make a profit. The key to ensuring that you have a successful sale is knowing the legalities involved when selling a business.
When you know the legal issues and have a strong legal team by your side you will not make any blunders that will be costly or get you into trouble with the law.
If you would like help with selling your business do not hesitate to contact our legal team.