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Selling Your Business: Preparing for Your Lawyer

If you decide to sell your business, it's a good idea to consult with an attorney about the sales process to make sure you are getting a good deal. You also need to follow all applicable laws and procedures.

This article prepares you to meet with your small business lawyer to discuss purchase agreements and the sale of your business.

When To Sell Your Business

A small business owner puts a lot of time and energy into their business. That can make it particularly difficult to decide to sell the business.

If possible, it's best to sell when your business is profitable, has a positive future forecast, and the economy is doing well. It makes it easier to receive your asking price from potential buyers. But waiting on those near-perfect conditions may lead you to hold on to your business for longer than you want.

Reasons You May Sell Your Small Business

Sometimes, you may need to sell your business due to personal reasons. Perhaps you or a family member are sick. Maybe you owe back taxes to the IRS and can't catch up. Or you may have done your due diligence and want to shift to a new kind of business.

Even if the business is not doing well under your control, selling your business could be a wise and profitable alternative. You just want to sell your business.

Of course, you must have a buyer first.

A business owner who can't find a prospective buyer must close their business. Even the most well-laid business plans may not prepare you for closing your doors.

A small business attorney can still help you sell off your business assets and intangible assets like intellectual property or get out of your current lease. They can also help you prepare an exit strategy when you close.

No matter your reason for selling your business, it's important to plan ahead. The process can take a long time to complete, and a lawyer experienced in business sales can help.

Questions To Expect in a Business Sale Meeting With a Lawyer

Before you meet with your lawyer, their office may send you a form with a list of questions to fill out. Some lawyers may wait to ask the questions when they see you.

Regardless, make sure you get your answers together ahead of time. Here are common questions you can expect:

  • Legal name of the business
  • Previous names of the business (if any)
  • Trade name, if you have one
  • Date of formation with your secretary of state
  • Location of business headquarters (address)
  • Mailing address
  • Addresses of any other locations you may have
  • Phone number
  • Legal entity status of your business (sole proprietorship, limited liability company, corporation, partnership)
  • Federal tax identification number (also sometimes called EIN)
  • State tax identification number
  • Business valuation (or the fair market value of your business)
  • Contact information of your CPA or accountant
  • List of insurance policies the business owns, the amount, and the associated agent
  • List of any real estate your business owns
  • List of employees, contractors, and vendors
  • List of creditors
  • List of the names and titles of the people authorized to sign documents for your business
  • Contact information for your business broker selling the business, if you have one
  • Contact information for your business appraiser, if you have one
  • Description of your business
  • If your business is a corporation, you'll also need the following:
  • Number of shares of common stock
  • If your company publicly held, include your Securities and Exchange Commission (SEC) file number
  • A list of stockholders or shareholders
  • Number and percentage of shares owned
  • Total amount of stock issued
  • Number of shares of preferred stock

If your business is a limited liability company:

  • List of the member ownership percentages
  • List the members of the company

If your business is a partnership:

  • Whether it's professional, general, or limited
  • List of the partners

Documents Related To Selling Your Business

In order for an attorney to be able to provide you with the best financial advice regarding the sale of your business, you must ensure they have copies of all the relevant business documents. This includes legal documents, financial documents, and other documents.

The following list details the documents you should provide to your attorney when discussing the sale of your business.

  • Sales agreement or letter of intent if you have been presented one by a potential buyer
  • Confidentiality agreements
  • Nondisclosure agreements
  • Current financial statements (including balance sheets, profit and loss statements, cash flow statements, tax returns, and projections)
  • Copies of the most recent value of the business (business valuation)
  • Copies of any intellectual property your business has rights in, like trademark, patent, or copyright certificates
  • Copies of your company's incorporation, partnership, or limited liability company (LLC) documents:
  • Copies of your company's insurance policies
  • Copies of all employment agreements and independent contractor agreements
  • Copies of any pending lawsuits against your business
  • Copies of your financial records from your CPA, like your federal and state tax returns for the last three years
  • Deeds that include the legal description of any real property owned by the business
  • Copies of any lease agreements
  • Copies of all leases for vehicles, equipment, computers, or other items you do not own
  • Schedule of your assets
  • Copies of all debts like notes, mortgages, security agreements, loan agreements, and U.C.C. financing statements
  • Copies of any outstanding state or federal tax claims, audits, or actions
  • Copies of business registrations, licenses, and permits
  • Copies of "key-person" insurance policies
  • Copies of all outstanding contracts with vendors and customers
  • If you are a sole proprietor or looking to buy another business, a copy of your personal financial statement

Please keep in mind that this list is not meant to be exhaustive. You may have other documents that will be relevant to your particular business or situation. Suppose you're not sure whether a certain document or other information is relevant to your business. In that case, you should err on the side of caution. Provide the information or document to your attorney so that they can decide if it's relevant.

Getting Legal Advice

You likely have many questions or concerns about selling your business after reading this list. Contact an experienced business and commercial attorney in your area to make sure you know you are getting the best deal in selling your business. Do your due diligence and learn more in FindLaw's section on Business Lawyers and Resources.

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