When buying or selling a company, it is important to have experts to back up the owner during these transactions. A lawyer is needed for interactions, contracts, documentation and various transactions, but an accountant is necessary for the financial data, numbers and funds either being obtained or when buying a new business.
Hiring a business lawyer to help sell a business will make the process less stressful and likely help you get the most return possible on your sale. The attorney represents the seller's interests and ensures all documents are in order. Lawyers also handle the complexities and extremities of business succession.Dec 31, 2021
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AnswerDo I need an attorney to sell my small business?
If you are selling your business, you should consult with a skilled and knowledgeable business lawyer. The process of selling a business is complicated and requires a thorough knowledge of not only business law, but local laws as well. An experienced business attorney can guide you through the selling process and ensure you have obtained all necessary documentation for the …
How can a lawyer help my business?
When buying or selling a company, it is important to have experts to back up the owner during these transactions. A lawyer is needed for interactions, contracts, documentation and various transactions, but an accountant is necessary for the financial data, numbers and funds either being obtained or when buying a new business. Lawyers are needed for multiple reasons, but …
How do I Sell my Small Business?
Jan 16, 2018 · Among the countless worries for entrepreneurs who are starting or are already running a small business is the question of whether they need a business lawyer. The perception is that attorneys charge high rates and many small businesses don't have much, if any, extra capital with which to pay lawyers. As a result, most small business owners only hire an …
Do I need a lawyer when buying a house?
Mar 08, 2010 · A lawyer who has provided good business advice for the business being sold is an obvious choice. Lawyers should be able to advise the seller on the pros and cons of stock sales versus asset sales,...
Does selling a business require a lawyer?
Whether you are the vendor or purchaser of the business, it is always advisable to have the agreement checked by a lawyer before signing. If you have reached a private agreement to buy or sell a business (with no broker involved) we can draft the sale and purchase agreement for you.
What should you not do when selling a business?
Top Mistakes to Avoid When Selling Your BusinessLean on Professional Help.Pre-Qualify Potential Buyers.Avoid Misrepresenting Your Business.Don't Breach Confidentiality.Ensure a Transition Plan is in Place.
What to do before you sell your business?
10 Things To Do Before Selling Your BusinessGet your house in order. ... Separate different lines of business. ... Put together the right team and let them develop a plan. ... Understand the value of your business from a buyer's perspective. ... Fully understand vulnerabilities. ... Create an exhaustive letter of intent (LOI).More items...
How do I sell my business privately?
How to Sell a Small Business in 7 StepsDetermine the value of your company. ... Clean up your small business financials. ... Prepare your exit strategy in advance. ... Boost your sales. ... Find a business broker. ... Pre-qualify your buyers. ... Get business contracts in order.Jan 3, 2014
What happens to cash in bank when a business is sold?
In conclusion, 99% of the time, the cash in the bank is for the seller to keep. And that should be considered by sellers as part of their proceeds of sale when planning on how much the sellers will net after the closing costs and taxes that affect the sale.Apr 28, 2021
How do you value a business to sell?
There are a number of ways to determine the market value of your business.Tally the value of assets. Add up the value of everything the business owns, including all equipment and inventory. ... Base it on revenue. ... Use earnings multiples. ... Do a discounted cash-flow analysis. ... Go beyond financial formulas.
How do you value a small business?
The formula is quite simple: business value equals assets minus liabilities. Your business assets include anything that has value that can be converted to cash, like real estate, equipment or inventory.Jul 15, 2020
How can I sell my small business fast?
Here are the steps for selling your business:Prepare to put your business on the market.Time the sale for the right moment.Calculate the value of your business.Get professional help — broker, lawyer, and accountant.Perform sell-side due diligence.Put your business on the market.Pre-qualify buyers.More items...•Jul 8, 2021
When should you sell your business?
4 Signs That It's Time to Sell Your BusinessYou're on 4 or 5 different medications. One for anxiety, one for depression, another for focus.... ... The company has outgrown your skill set. This point is closely related to the first. ... The market might be moving against you. ... A lucrative opportunity presents itself.Dec 1, 2014
How do I write a bill of sale for my business?
Know How to Fill Out the Business Bill of SaleDate of Sale.Buyer's name and address.Seller's name and address.Business name and details, which include: State of incorporation. Address of the business's main headquarters. Assets, shares, personal property and other interests included with the company.
What does a lawyer do when selling a business?
When selling a business, a lawyer often works with other professionals to ascertain the value of the company, what assets and liabilities exist and how best to ensure this information appears in a positive manner to the potential buyer. This means explaining the structure, the layout, the files and figures and how employees ...
Why do lawyers work for businesses?
When buying a business, the lawyer may have more work than when selling. This is to ensure that due diligence is performed and all factors are considered when purchasing the new company.
Why is it important to have an accountant?
A lawyer is needed for interactions, contracts, documentation and various transactions, but an accountant is necessary for the financial data, numbers and funds either being obtained or when buying a new business. ...
What is a lawyer contract?
A lawyer drafts contracts that the buyer or seller needs to sign with the other owner. These should have certain conditions to ensure the arrangement is beneficial, and when necessary, advantageous for both parties. When a company is accruing revenue, it is often necessary to have an accountant to keep the book up to date.
What does a business lawyer do?
The lawyer may need to contact state officials, file documents with certain agencies and obtain licenses when buying a new company. It is his or her job to protect the owner from litigation, liability and legal injury when buying or selling a company. With a business lawyer, it is possible to achieve success. Provided by HG.org.
What does an accountant do?
An accountant may assist in analyzing reports, statements and issues that may be complicated. This could all be negative or positive, and they may require the attention of the owner. The accountant has knowledge if equipment has been purchased or leased and other assets are on hand.
When is it necessary to have an accountant?
When a company is accruing revenue, it is often necessary to have an accountant to keep the book up to date. This means coordinating with payroll for employees, client payments and interactions and other financial matters. Without an accountant, it is more frequent that tax violations and other complications may arise.
Issues You Can Handle on Your Own
There are certain matters that are fairly straightforward and/or not unduly difficult to learn and therefore do not require the services of an attorney who charges at least $200 per hour. There are enough expenses associated with running a business, why not save yourself a load of money and do it yourself if you can?
Issues Where You Will Need a Business Lawyer
Most of the issues outlined above can be handled by any intelligent business owner (if you can run a business, you can certainly fill out IRS forms or fill in boilerplate business forms). There are times, however, when a business faces issues that are too complex, too time consuming, or fraught with liability issues.
An Ounce of Prevention
While you certainly need to retain an attorney for the serious issues above, your emphasis should be placed on preventing such occurrences in the first place. Prevention does not necessarily involve hiring an attorney, though consulting with one wouldn't hurt.
Get in Touch with a Business Attorney Before You Need One
You won't need a lawyer for each and every legal issue that comes up in your business. But when you do, it's good to know where to find the right one. And -- more to the point -- you may not know you need legal help until it's too late, as attorneys can help you stay in compliance with the law and spot developing legal issues early.
How to dissolve a business?
Follow these steps to closing your business: 1 Decide to close. Sole proprietors can decide on their own, but any type of partnership requires the co-owners to agree. Follow your articles of organization and document with a written agreement. 2 File dissolution documents. Failure to legally dissolve an LLC or corporation with any state you’re registered in will expose you to continued taxes and filing requirements. Look up your state for more information from the Secretary of State, Business Bureau, or Business Agency websites. 3 Cancel registrations, permits, licenses, and business names. Protect your finances and reputation by canceling any of these that you no longer need, including your trade name. 4 Comply with employment and labor laws. Reference the Department of Labor’s Worker Adjustment and Retraining Notification Act (WARN) for employee payment after closing, along with other federal and state laws. 5 Resolve financial obligations. Handle final returns for income tax and sales tax. Cancel your Employer Identification Number, notify federal and state tax agencies, and follow this checklist from the IRS with instructions on how to close your business. 6 Maintain records. You may be legally required to maintain tax and employment records, among other files. Common guidelines advise keeping records for anywhere from three to seven years.
What is a sales agreement?
Make a sales agreement. You must prepare a sales agreement to sell your business officially. This document allows for the purchase of assets or stock of a corporation. An attorney should review it to make sure it’s accurate and comprehensive.
What are the legal implications of transferring ownership of a family business?
Transferring ownership of a family business may have legal impacts, such as estate and gift tax obligations imposed by the IRS. A transfer of property would also likely require taxation.
What is business valuation?
Use business valuation to set a monetary value before marketing to prospective buyers. You can do a self-evaluation and learn more about the resources needed for business valuation appraisals from The Appraisal Foundation. Accurately value all property and real estate tied to your small business.
How long does it take to find a buyer for a business?
Finding a Buyer. A business sale may take between six months and two years according to SCORE, a nonprofit association for entrepreneurs and partners of the U.S. Small Business Administration. Finding the right buyer can be a challenge. Try not to limit your advertising, and you'll attract more potential buyers.
How to invest money from a home sale?
Take some time—at least a few months—before spending the profits from the sale. Create a plan outlining your financial goals, and learn about any tax consequences associated with the sudden wealth. Speak with a financial professional to determine how you want to invest the money and focus on long-term benefits, such as getting out of debt and saving for retirement .
What is a non-compete agreement?
In addition, the buyer may have you sign a non-compete agreement, in which you would agree to not start a new, competing business and woo away customers.
Is selling a business a good idea?
Selling a business is time-consuming and for many people, it's an emotional venture. A good reason to sell or the existence of a "hot" market can ease the burden, as can the help of professionals.
What happens when you sell a business?
When you go to sell your business, there is a certain legal process involved that must be followed. It’s not like you can just have the buyer write you a check and then let them take over your business. There are a few legal steps to closing the sale of your business which ensures that it will be a successful transaction for both parties. Otherwise, you run the risk of facing legal ramifications after the sale if the buyer becomes unhappy with some aspect of the business that they purchased from you.
What happens if a buyer defaults on a business?
Otherwise, if your buyer defaults, then you must go through a legal procedure to reclaim ownership of your business.
What is due diligence in real estate?
Due diligence is a term you often see in real estate documents but they also apply to the documents which pertain to selling a business. As mentioned in the first step, the terms of due diligence are outlined in the Letter of Intent. Due diligence is when the buyer does their own research into all aspects of your business. They will want to look at your financial records, customer records, sales reports, profit & loss statements, expense statements, leases, business loans, business contracts and so on. All this information will help them decide whether they want to purchase your business.
Why do you need a letter of intent?
That is why a Letter of Intent should have a confidentiality agreement which prevents the buyer from using your information or revealing it to another source if the sale does not occur. This is the best protection you can give yourself as a seller while you’re trying to secure a purchase agreement with a buyer.
How many pages are in a purchase agreement?
Be aware that a purchase agreement is not some 2-page document. Depending on the size of your business and the number of terms outlined, it could have hundreds of pages to it. That is why it is best to have an attorney who is experienced in contractual law to handle the agreement and review it for you.
What happens if you don't sign a letter of intent?
After the Letter of Intent is signed by you and the buyer, they can now use this legal document to show to lenders for the purpose of securing a loan to purchase the business.
What is a purchase agreement?
Unlike the Letter of Intent, the purchase agreement is a binding contract that will obligate the buyer to purchase your property for the price and terms agreed upon in the document. At this point, you should have an attorney create this purchase agreement for you. Sometimes the buyer will have their own attorney do it.
Reasons For The Sale
You've decided to sell your business. Why? That's one of the first questions a potential buyer will ask. Owners commonly sell their businesses for any of the following reasons: 1. Retirement 2. Partnership disputes 3. Illness or death 4. Becoming overworked 5. Boredom Some owners consider selling the business w…
Timing of The Sale
- Prepare for the sale as early as possible, preferably a year or two ahead of time. The preparation will help you to improve your financial records, business structure, and customer base to make the business more profitable. These improvements will also ease the transition for the buyer and keep the business running smoothly.
Business valuation
- Next, you'll want to determine the worth of your business to make sure you don't price it too high or too low. Locate a business appraiser to get a valuation. The appraiser will draw up a detailed explanation of the business's worth. The document will bring credibility to the asking price and can serve as a gauge for your listing price.
Should You Use A Broker?
- Selling the business yourself allows you to save money and avoid paying a broker's commission. It's also the best route when the sale is to a trusted family member or current employee. In other circumstances, a broker can help free up time for you to keep the business up and running, or keep the sale quiet and get the highest price (because the broker will want to maximize their c…
Preparing Documents
- Gather your financial statements and tax returnsdating back three to four years and review them with an accountant. In addition, develop a list of equipment that's being sold with the business. Also, create a list of contacts related to sales transactions and supplies, and dig up any relevant paperwork such as your current lease. Create copies of these documents to distribute to financi…
Finding A Buyer
- A business sale may take between six months and two years according to SCORE, a nonprofit association for entrepreneurs and partners of the U.S. Small Business Administration. Finding the right buyer can be a challenge. Try not to limit your advertising, and you'll attract more potential buyers. Once you have prospective buyers, here's how to keep the process moving along: 1. Get …
Handling The Profits
- Take some time—at least a few months—before spending the profits from the sale. Create a plan outlining your financial goals, and learn about any tax consequences associated with the sudden wealth. Speak with a financial professional to determine how you want to invest the money and focus on long-term benefits, such as getting out of debt and saving for retirement.
How to Sell A Business FAQs
- How Do You Sell a Small Business Without a Broker?
While many people would like to avoid the 10% a business broker may charge, the risks of selling on your own may outweigh the loss of money. But if you're going to go it alone, prioritize selling to a buyer you know, make use of the advice of experienced, retired owners and executives, and us… - How Do You Sell a Business Idea?
It's possible to approach a company with a business idea, but first, you need to do your research, prepare a presentation, and research and approach potential targets. While some business plans are best protected with a patent, others can be secured by getting a potential company you wan…
The Bottom Line
- Selling a business is time-consuming and for many people, it's an emotional venture. A good reason to sell or the existence of a "hot" market can ease the burden, as can the help of professionals. It may also be possible to receive free counseling from organizations such as SCORE, and your local chamber of commercemay offer relevant seminars and workshops. Whe…
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