Selling a Business

Selling a business: If you’re the owner of a small business and are in the market to sell, don’t be intimidated by what sounds like a herculean task. Move forward by breaking the business selling process into manageable pieces. The preliminary steps are often the most difficult. Begin by getting your accounting world in order. This step is critical because you need to have a good grasp of where you stand before you can set a price. Moreover, you will need to convince a buyer that your finances are in shape (and maybe more importantly, the buyer’s lender). Showing a buyer a napkin with last month’s sales is not going to instill a lot of confidence. Next, try to determine what you are hoping to sell. A business sale can include anything from the sale of the assets to the sale of a name to the goodwill you’ve engendered in your years of business. A sale of a business can include your experience. Would you be willing to stay on in management for a time?  Everything has a value. Seek out professional advice early. There are legal advantages, tax advantages, and business advantages to how a sale is structured. Accountants, lawyers, and other business professionals can help you navigate this process. Although this will cost money up front, proper advice on what to sell, when to sell, and how to sell can increase your profit significantly. Structuring the sale of a business: The next step in selling a business is determining how to structure the sale. There are really three options: (1) Asset sale, (2) stock/membership sale, or (3) merger. Each of these has its advantages and disadvantages and whether you are selling or buying has a key role in your preference. Asset sale: In the sale of business assets, the buyer purchases only the business assets rather than the business itself. Typically, this is used to avoid the liability of the prior business. Stock/membership sale: Depending on the type of business, a buyer can take control of stock or membership units. Structuring a sale in such a manner is typically the most seamless. Customers and contracts are transitioned to the new owners without any additional paperwork. Merger: Companies can merge with one another. Typically, this done for tax reasons as the company can potentially reorganize. Determining which method is right for selling a business requires careful thought as to legal liabilities and tax ramifications. For more information on how we can help you with the legal aspects of your business sale or purchase, please contact Mike Cass at [email protected]. The comments posted in this blog are for general informational purposes only. They are not to be considered as legal advice, and they do not establish an attorney-client relationship. For legal advice regarding your specific situation, please consult your attorney. Copyright 2015 Swenson Lervick Syverson Trosvig Jacobson Schultz, PA