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What to Consider When Selling Your Business

Updated: Jan 28, 2022

Selling a business poses unique legal challenges. This is not the type of project you should attempt to handle on your own in a DIY (do it yourself) manner. Put your faith in a business law attorney and you'll have the guidance necessary to overcome all of the legal hurdles that stand in the way of a profitable and seamless sale of your business.

The Sale Of A Business Is Inherently Complex

You've worked years, decades or even your entire life to build your business. A single mistake during the sale has the potential to significantly reduce the value of that work. The moral of this story is the subtleties of business sales matter a great deal.

The assistance of business law attorneys will be necessary to analyze the details of the proposed sale and determine if they serve your interest, are weighted in favor of the party acquiring your business or prove mutually beneficial. The bottom line is a trained legal eye will prove essential to understanding this complex transaction. Fail to tap into the expertise of a business law attorney and all of your hard work might end up in vain.

Legal Assistance With All Aspects Of Business Sales

Whether you are considering offers for your business or developing an exit strategy, a business law firm will help every step of the way until the deal is culminated. A legal team will sit down with you and explain the language used in the sale agreement in plain terms you can understand without a Juris Doctor degree. Your business law attorney will ultimately help you maximize the value of your business at the time of sale by carefully crafting the subtleties used in the language of the agreement.

There will inevitably be legal issues that arise during the sale process. Rely on your attorney for ongoing guidance and he or she will help you overcome those challenges with grace and efficiency, setting the stage for the timely sale of your business. Pick this legal specialist's brain, pose questions, raise concerns and your attorney will demystify the legalese used in the business sale contract. This clarification is essential to obtaining an accurate and thorough understanding of the agreement.

Preparation Is Essential To A Successful Transition

There is a common misconception that it is possible to sell or acquire a business by filling in blank spaces on a template printed from the web. Take this path and you will have fallen into a pitfall that could lead to financial ruin as well as lawsuits down the line. If you have not sold or purchased a business in the past, it is important that you understand the value of retaining a broker. The planning that goes into the sale of your business ultimately shapes the outcome.

If you are considering selling your business, don't list it for sale right away. Meet with a broker to consider whether the entity is worth selling, whether now is the right time to sell and estimate the potential value. The formal term used for this evaluation is business valuation. Rely on an experienced professional to perform a comprehensive business valuation on your behalf and you will have the information necessary to determine if now is the optimal time to sell.

Once the potential value of your business is determined based on its merits and market factors, the focus shifts to the specific components to be sold. As an example, you might want to retain partial ownership of the business by retaining shares. Alternatively, it might make sense to sell the entirety of the business or only its assets. Factor in your desire to exit the enterprise and you will have a general idea of the specific dollar figure or a general range that constitutes a fair offer.

Consider The Transition Period

Once you determine your business's fair value on the open market and reach an agreement with a buyer, it is time to iron out the language of the agreement. Your attorney will handle the legal side of this transaction on your behalf. Reaching an agreement with a prospective buyer will be that much easier if you are on the same page in terms of the transition period. Most of those interested in acquiring an ownership stake in a business seek assistance from the current owner to ameliorate the transition.

If you are willing to remain with the organization to train the new owner(s), provide guidance in the form of a consulting role and possibly even help with marketing during the transition, obtaining your target figure for the business will be that much easier. Ongoing assistance throughout the ownership transition is an especially strong selling point for potential buyers who lack industry experience and knowledge.

Above all, the new owner will need the assistance and loyalty of your current workforce. Meet with your team to ensure they will provide the new owner with support. Communicate the allegiance of your workforce to the buying party prior to finalizing the deal and the buyer will be able to move forward in full confidence.

Additional Considerations When Selling Your Business

Selling your business has the potential to become quite complicated, especially in the context of intellectual property and confidentiality. The legal component of the agreement should not cause even the slightest consternation. Let a business law attorney sweat the small stuff of the contract and you'll be able to square your focus on running the business up until the point of the sale, facilitating as seamless of a transition as possible.

Selling a business often requires a confidentiality agreement. The business seller and buyer enter into such an agreement prepared and negotiated by their respective attorneys. If no such agreement is in place, disclosing information to prospective buyers poses a risk. If the prospective buyer does not want to sign a confidentiality agreement, it might not be in your interest to divulge all of your business's information until the last possible moment.

Intellectual property protection also plays a role in the sale of a business. Trade secrets, copyrights, patents and trademarks constitute intellectual property. As the business owner, it is your responsibility to ensure the proper steps are taken to safeguard this intellectual property. Your legal team will review the intellectual property, confirm that filings are up to date and set the stage for the buyer to obtain the same intellectual property protections moving forward.

The contracts your business currently has in place are also quite important from the perspective of potential buyers. The buyer will want to take a look at the material contracts to verify their legitimacy, terms and length. Your attorney will perform a review of these contracts to identify potential problems, proactively address those issues and determine if third-party consent is necessary for a seamless transition. Restrictive covenants, indemnification obligations and additional contractual terms should also be addressed at this point.


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