06 Feb Want to Sell Your Business? Do this First . . .
When it comes to selling your business, I’ve seen firsthand the pitfalls that await unwary sellers during the sales process. The stakes are high and the legal landscape is fraught with potential hazards. It’s critical you go in with your eyes wide open.
There are multiple facets to getting your business sale right and making sure you don’t regret it later. Here are key legal considerations to watch out for:
Business Valuation – More Than Just Numbers
What is your business worth? This question involves much more than a back-of-the-napkin calculation or just stating a multiple of EBITDA. Valuation involves also understanding what adds (or takes away) value to your business from a legal standpoint.
Is the ownership of your company documented properly? Do you have organized corporate legal records and are all agreements, resolutions and other documents signed and properly dated? Having corporate records that are a mess can be a big red flag to a potential buyer.
How about legal liability? Does your company have a history of lawsuits and are they all resolved? Buyers don’t want to purchase your legal troubles and this will impact the purchase price you’re offered or and possibly whether you have a deal at all.
Have you complied with all regulations pertaining to your business and industry? Have you properly protected any intellectual property assets you’re selling? These and other questions will have a significant impact on the purchase price you’ll be able to get for your business.
Structuring the Deal
The way you structure the sale can have significant legal and tax implications. Will you be selling the assets of the company or the stock? Each option has its advantages and disadvantages, depending on your specific circumstances. Careful legal consideration is necessary to optimize your outcome.
The Sales Agreement
The sales agreement is the cornerstone of the transaction. It should comprehensively cover every aspect of the sale, including payment terms, warranties, indemnities, and what happens post-sale. This document requires meticulous legal drafting to ensure that your interests are fully protected.
Understand your obligations after the sale is completed. This might include transition services, non-compete clauses, and other post-sale commitments that need to be clearly defined and agreed upon.
Go In With Eyes Wide Open
Selling your business is a complex process, laden with legal intricacies. Take a proactive role in making sure you get the best deal and are protected from legal landmines.
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This article is a service of GARZA Business & Estate Law. We empower you to make informed decisions about your family and business, helping you protect and grow your life’s work. Begin by contacting our office today.