If you’ve made the decision to sell your small business, there are a number of things you will need to do in addition to consulting with a Family Business Lawyer™ to ensure the process goes smoothly:
Set a realistic price. Coming up with a realistic price for your business will entail some research. Look at what similar businesses in your industry have sold for, and check with your industry association to determine sales trends. You will also need to estimate the worth of your business based on actual assets as well as any goodwill.
Consider taxes. Be sure you understand the tax consequences to the sale of your business, which will be affected by the structure of your company (whether it’s a corporation, LLC, partnership or sole proprietorship) and whether you are selling the assets of the business, or the entire entity.
Get financials in shape. You should consult with a tax attorney or accountant about recasting your tax returns to add back any discretionary expenses that prospective buyers may not spend – for example, if the company paid for your family’s medical insurance, or bonuses were given to family members.
Advertise. Unless you have a buyer in mind, you will likely need to advertise the sale of your business in local newspapers, trade publications and on business sale websites. If you are willing to part with a commission, a business broker may also be an option.
Negotiating the sale. This is where having the counsel of a Family Business Lawyer™ can prove invaluable. Whether you are selling all or part of your business, the guidance provided by an experienced attorney can give you peace of mind that you are striking the best possible deal.
Developing a sales agreement. This should include a list of the assets included in the sale as well as the value of the assets, any contracts or business relationships the new buyer will be assuming, and the structure of the sale, including how you will be paid. Again, the counsel of a Family Business Lawyer™ is highly recommended.
Closing preparation. You will need to prepare a list of all the documents and other items like building keys and security codes that need to be turned over to the buyer at closing.
Filing the IRS paperwork. After the sale, you and the new owner must file an Asset Acquisition Statement with the IRS and include it with your tax returns.
If you’re a small or mid-size business owner, contact a Family Business Lawyer today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit. Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this month, we will waive that fee.