Will I Be Able to Sell my Business on my Own?
You have worked hard and build a company. You have good employees and fill a need in your community. As rewarding as it can be, however, there comes a time where the prospect of selling you company comes to mind. Selling is a difficult decision and can be a very complicated process.
In addition to the general decision to sell, there are many ulterior considerations when considering selling your company. Do you want to sell and walk away? Would you like to stay on and continue to work with the company after sale? Are there other conditions, such as retention of particular employees?
Selling the company will likely take a time, time for your to prepare for the sale and time for a purchaser to complete due diligence prior to inking the deal. You should involve a Seattle business transaction attorney at the earliest stages of the process. Make use of the services of both your Seattle business attorney and accountant to avoid errors and lawsuits.
Calculate the Worth of Your Company
Your company’s worth is based on more than just its tangible assets. While hard assets are relatively easy to value, determining the significance of your trained staff, venue, suppliers, and customer lists is far more complicated, not to mention “blue sky,” your company’s potential for growth and profitability. You should consider getting a company valuation by a qualified appraiser.
Bear in mind when evaluating the appraisal that a buyer can place varying importance on numerous company factors. In general, however, buyers are usually most drawn to the company’s profits and cash flow.
Decide What You Want To Sell
If you are a corporation, you can sell your company in two ways: asset acquisition or stock purchase.
The choice you choose can have a significant impact on your tax liability. While selling your stock is chiefly more satisfactory, an asset transaction is generally preferred by buyers. Only the asset-buying option is available to unincorporated companies, but you will still need to address the value of intangible assets like good will.
When considering your sale, you should determine what you want to include and what you want to hold back. Determine whether you want to hold any assets or whether any assets will be of limited attraction to the buyer.
You also need to decide whether you will finance the sale yourself or require a cash transaction. Often smaller businesses sell to individuals who cannot secure separate financing. In that case, what portion of the buying price will you demand as a down payment. Make sure you are aware of the tax implications of putting your business up for sale.
Initial Letter of Intent
Seller funding is used to sell the majority of small businesses. The buyer hands you a down payment and then pays the remainder over several years.
The purchaser is required to sign a letter of intent (LOI) after you have decided on a price.
The LOI is not a binding document, but it outlines the intention of the pending sale and the purchase goal. At this point, the buyer will often make a deposit.
The letter authorizes the buyer to conduct a thorough investigation of your business, a process referred to as due diligence.
Your Seattle Washington attorneys will suggest that a confidentiality clause should be included in the letter to protect your company’s secrets. This requires the buyer to keep quiet about the company’s information if the transaction falls through, for example secret processes, customer lists, proprietary ingredients, etc.
The buyer has a certain period to investigate your company.
All your services, staff members, leases, loan, and financial documents should be open to them. They may also seek to communicate with your staff as well to understand the business and/or to determine whether they want to keep the employees on board after the sale..
Be patient and open to answering any questions your buyer might ask. Be sure to divulge all future problems right away through your Seattle business attorneys.
Your Seattle business lawyers at Frey Buck law firm can also look at your buyer’s creditworthiness, credibility, and management abilities during this period. If the company fails, the buyer may sue you, and it is important to assess and address any risks associated with that prospect during the pre-closing period.
The Purchase Contract
The buyer’s lawyer usually draft a purchase and sale agreement is a formal, legally binding contract will specify what you’re selling. You and the purchaser will negotiate the terms of this final agreement. The agreement will have certain requirements for you both before and after the sale, including representations and warranties related to the business, indemnity clauses and other details intended to allow you and the buyer to divvy up the risks associated with the business. You will also agree on an asset allocation that will impact your tax exposure in the sale.
If you plan to stay on as an adviser for an extended period, you will also likely need an employment contract. Your business attorneys can also assist you in negotiation that agreement.
The purchase and sale arrangement will be a detailed document that the Frey Buck law firm and the buyer’s attorney will have thoroughly scrutinized. The goal is to assure that everyone in the agreement understands who has responsibility for what as the transaction proceeds.