Legal Things to Consider When Selling a Business
Are you thinking about selling your business? Here are the 4 things you absolutely have to get right when you’re selling your business.
The first thing you absolutely have to get right when you’re selling your business is getting paid. One way to do that is to sell your business for cash on the barrel head and take the money and you got paid. That’s the best thing. A lot of times, what makes the deal work, though, is that the seller agrees to be paid over time. When that happens, what you have to get right is
The last thing you absolutely have to get right when you sell your business is you have to get the right team together. And if you think about it, some team members are always going to be there, someone who’s going to value the business, someone who’s going to give the tax strategy, someone who’s going to give you legal strategy and guidance and assist with the documentation.
to make sure you’ve got collateral and you’ve got clear payment terms that are going to be enforceable so you know your buyer is going to pay you.
And you can tell yourself, “Well, I just won’t hire those people,” but that’s an illusion because, in reality, when you say that, what you’ve done is you’ve hired yourself to be the valuation expert, the
The second thing you absolutely have to get right when you sell your business is you need to
tax strategist, and the attorney. That’s why I’m encouraging you to pay attention to who needs to be on the team and make a thoughtful choice. If you’re going to wear the hat of one
make the appropriate disclosures of risks and of liabilities associated with your business. You do this for two reasons. One is that you don’t want to be accused
of those team members, you just need to be intentional and decide,
later of fraud or deception when your buyer stumbles on liabilities they didn’t appreciate beforehand. The second reason is because you want it to be clear that the buyer is taking over those risks and liabilities when they buy the business. It is important to make sure you’re working with your attorney to make really good disclosures about the business and its state of affairs so when you sell it, you can wash your hands and walk away. The third thing you absolutely need to get right when you sell your business is you need to make it crystal clear what is included in the sale and what is not included in the sale. For example, if you intend to keep the accounts receivable, that has to be clearly stated in the sale, and there needs to be a cutoff date where you’re keeping accounts receivable up to a certain date, and then the buyer is taking over the accounts receivable after that date. If you’re keeping account balances, perhaps you’re going to hold onto the money in the checking account, that’s fine, but it just needs to be crystal clear in the documentation for selling the business.
“I’ve got a good reason why I can wear the legal hat or the tax strategy hat.” And then just be honest with yourself. If there’s not a good reason for you to wear the hat of one of the professionals, then I would encourage you to find the right professional to wear that hat for you and get them working for you. So, again, remember the four things you absolutely need to get right when you sell your business: Make sure you get paid, make sure you’re giving the appropriate disclosures of risks and liabilities, make sure everything is crystal clear as to what is included in the deal, and finally, make sure you’ve got the right team to give you the legal, tax, valuation, and other advice you need to nail down the sale. If you have any questions about these things, we are happy to talk to you about them. You can contact us at the Sierra Crest Business Law Group.
691 Sierra Rose Dr., Suite B Reno, NV 89511 775.448.6070 WWW.SIERRACRESTLAW.COM
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