Business ownership has its advantages, such as independence, control, financial rewards, and a certain lifestyle. However, there may come a time when you want to sell your business. Whether you want to retire, change your lifestyle, start a new business venture, or the market trends indicate that it is the right time to sell, business owners looking to move on from business ownership should consider partnering with a law firm that specializes in the purchase and sale of businesses.
Operating a business involves a number of legal specialties, including corporate governance, owner-relations, buy-sell agreements, intellectual property, commercial contracts, commercial leasing, tax law, real estate, labor and unemployment, and financing. Business ownership is often seen as building and leaving a legacy and protecting that legacy should be a priority for the business owner. The same level of diligence in managing your business should be applied to selecting a business lawyer when you are ready to sell your business. Selling a small business is no exception as every business sale should involve a careful review of the operations and corporate records by a business attorney and an understanding of the business before negotiating a sale.
Business Attorney as Business Partner and Consultant
Partnering with a law firm such as Horenstein Law Group will allow you to plan and fine-tune your exit strategy with experienced business lawyers. Our business lawyers will work with you on obtaining a business valuation, which can be included in an offering memorandum. Additional information in the offering memorandum can include profit and loss statements, tax returns, cash flows, and other financial statements. The offering memorandum is then used as the marketing material in finding the right buyer. Potential buyers can include third parties, private equity companies, employees, or family members. It is important to keep in mind that what your business is worth to you may not always be reflected in the valuation and sale price. Business valuations are affected by the general health of the overall real estate and business markets and economy. The value of a business with a solid customer base and clearly defined growth trends can be affected by unforeseen circumstances. Sales prices can be based on valuations but can also be negotiated between the seller and buyer based on factors such as the value of the intellectual property, discoveries during due diligence, market trends, the value of receivables in progress, and seller financing.
Hiring experienced business attorneys when selling your business is just as important as finding the right buyer. An experienced business attorney will serve as a business consultant, negotiate for the business owner, anticipate and resolve potential complications in advance, help navigate the various stages of the deal, and complete the closing of the sale.
Overview on Selling A Business
Once you decide to sell your business, the first step is to consult with an experienced business attorney. A business attorney will work with the business’ tax advisor or CPA to determine the structure of the business sale and the tax implications and work with you in obtaining a business valuation. Capital gains tax, sales tax, and ordinary income tax implications will differ based on whether the sale is structured as a stock sale versus an asset sale.
Next, you will need to decide whether you need to engage a business broker in marketing your business for sale and finding potential buyers. If you do decide to engage a business broker, completing due diligence on the broker’s track record and prior success is especially important. Forbes has a good article with tips on qualifying a business broker.
When a potential buyer expresses interest, a business attorney will provide you with a letter of intent with your preferred terms for the sale. Items that are typically addressed in a letter of intent include the structure of the sale, the purchase price, the due diligence period, any covenants of non-compete or non-solicitation, whether the business’ intellectual property such as websites, trademarks, logos, patents, and copyrights are included in the sale, whether current employees will be hired by the new owner, any consulting period, and the closing date. A letter of intent should be treated as a non-binding agreement of the seller’s and buyer’s intent to enter into a more definitive purchase and sale agreement.
Once an interested buyer signs a letter of intent, the business attorney will prepare the necessary purchase and sale documents. Seller-financed deals will involve taking security in the assets of the business and will require additional agreements and filings.
Horenstein Law Group
Regardless of the type or size of your business, selling your business is a very involved process. The good news is that Horenstein Law Group is ready to partner with you and work out the details so you can head off into a great new future — whether that is retirement, a different lifestyle, or the establishment of a new business venture.
Horenstein Law Group provides general counsel services to its successful business clients. We have worked in the corporate business environment for many years and have a deep understanding of our clients’ business needs, especially when it is time to sell their business. Get in touch with us today!