Learn more about considerations to take when closing or selling a business.
There are many approaches to take in establishing an accurate valuation for your business. Finding the best method for your situation will provide you with the best measure of value.
Ending a business that isn’t working out can make way for new, successful endeavors. Don’t let the remnants of a business that exists in name only get you in legal hot water. Proper dissolution requires specific filings in both home and foreign states so that the business—and your liability—is legally terminated.
'Developing an Exit Strategy' discusses the different ways to and reasons for getting out of your business, and the numerous considerations involved when selling your company or passing it along to family members or key associates.
'Liquidation as an Exit Strategy' discusses liquidation and using liquidation specialists as an alternative to selling a business.
When you sell your business you may face a significant tax bill. In fact, if you're not careful, you can wind up with less than half of the purchase price in your pocket, after all taxes are paid! However, with skillful planning it's possible to minimize or defer at least some of these taxes.
In the context of the sale of a business, the "closing" is the point in time at which all necessary documents are signed by all the parties, apportionment of expenses up to the date of closing is done, money and keys are exchanged, and the buyer becomes the new owner of the business.
Once you have a general agreement with the buyer, the buyer usually drafts and signs a non-binding letter of intent. The buyer will then conduct a due diligence investigation. If this goes well, the purchase agreement will be drafted. You will want to make sure every detail is covered and reviewed. Finally, the buyer will obtain the financing, the deal will close and you will be ready for your next great adventure.
Business sales are rarely completed without some type of financing. Therefore, you'll need to know where the buyer is going to get the money to purchase your business. Generally, the money will come from either third-party financing or seller-financing or a combination. It is important to know what you are getting into if you finance any part of the sale.
After-sale involvement can take a number of different forms, the most common of which are an employment contract and a consulting agreement. In addition, many deals require a noncompete agreement that will bar you from starting a similar business nearby for a period of time. In addition to defining your after-sale role, these agreements can serve to compensate you in connection with the sale, with tax advantages to the buyer.
Other than the purchase price itself, the terms relating to payment are the most important items that must be determined. Indeed, payment terms can have a big impact on the price you'll accept for your business, as well as on the price the buyer is able and willing to pay.
Once you've decided on the appropriate value for your business, the next step is to find a buyer. Potential buyers may be interested in your company solely for the money it will bring them; others may see it as a strategic fit for their existing businesses and yet others may wish to continue it as is. Preparing a selling memorandum is an important step in getting the message out to these buyers and conveying the important terms of sale.
Valuing your business accurately is essential if you don't want to risk leaving money on the table or scaring away potential buyers. Before undertaking the appraisal, put time into sprucing up your business and its financials. Effort spent at the outside will pay dividends down the road.
In order to get the highest value for your business and to negotiate the selling process effectively and efficiently, it is imperative that you enlist the aid of qualified professionals.
There are many external and internal factors to consider when timing the sale of your business. By evaluating these factors, you can take actions to improve your chances of a successful sale.
At some point, you may want (or need) to sell your business. In order to get the most value and ensure the success of one of the most significant business decisions of your life, you need to determine your priorities, evaluate the timing of the sale, and assemble an expert team to assist you along the way. You also need to understand the ethical and legal duties that you face as you exit your business.
Transferring your business to family members or other insiders, in an orderly and successful manager, may be the toughest management challenge you face in the life of the business. Not only must you choose your successor wisely, you must thoroughly prepare him or her while confronting and resolving conflicting goals and agendas. Plus, you need to structure the transfer to minimize the tax impact on the business and your family.
No matter how successful your business is or how much you love what you are doing, at some point you must turn the business over to someone else. When that time comes, you will have two options: transferring the business to a family member or insider or selling the business to an unrelated third-party. The best strategy depends on a wide variety of factors.
When you hear the word "bankruptcy," it probably means a Chapter 7 proceeding. In a Chapter 7 bankruptcy, your assets (other than your exempt assets) are gathered together and sold. Any unsecured debt that isn't paid off from the sale proceeds is discharged, giving the debtor a debt-free fresh start.
When filing a bankruptcy action in certain states, you have the option to choose either the allowable federal asset exemptions or the applicable state's exemptions. Arkansas, Connecticut, District of Columbia, Hawaii, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont, Washington and Wisconsin all allow this flexibility. In all other states, you must choose the applicable state exemptions.