Useful Legal Considerations in Selling Your Business

Useful Legal Considerations in Selling Your Business - Sunbelt Business Brokers

When selling your business, you need to manage a range of logistic and legal considerations. Failing to adequately prepare can create unnecessary challenges for the future of your company and can even create legal challenges for you after the sale is complete.

To help ensure a smoother transition, consider some of the following legal considerations.

Preparing for the Sale

Before you even sell your business, you need to take steps to adequately prepare. You can get ready for the sale by:

  • Conducting a thorough business valuation.
  • Examining all your current contracts.
  • Organizing governing documents.
  • Taking inventory of intellectual property.
  • Reviewing any outstanding liabilities that could impact the sale.
  • Evaluating any pending litigation or unresolved disputes.

Additionally, properly preparing may enable you to highlight features of your business (such as intellectual property) that add to its value. You can also start by using the Sunbelt business valuation calculator to get a starting estimate for the value of your company.

Deal Structure

When selling your business, you’ll have to determine the terms of the sale and the way the deal is structured. If you’re the legal owner of the company, you can complete the sale as an asset sale. Otherwise, buyers will have to complete a stock sale through your shareholders.

Additionally, you’ll need to set payment terms, including whether the sale will be completed with a lump-sum payment or in installments over time. And make sure that the deal is structured to transfer the rights of any intellectual property to the new owner. It’s also helpful to create a confidentiality agreement to protect you until the official sale agreement is made.

Sale Agreement

The actual sale agreement will codify the sale’s terms and establish the means by which the transfer is made. It will include definitive timelines for the transfer of the business, too, as well as the terms and timeline for the buyer to render payment.

A sale agreement will also stipulate additional legal considerations, and you may be facing non-compete agreements to give the new owner room to thrive. During this process, you’ll cover closing documents and ensure that the contracts are properly assigned to new management.

Regulatory Compliance

It’s crucial that your business be up-to-date with regulatory requirements prior to completing the transfer. If you’re uncertain where your company presently stands, you might consider a regulatory audit to ensure that your company is in compliance with established industry standards and legal requirements.

Depending on your industry, you may want to address any environmental issues that could present challenges in the future. In fact, enhancing your company’s commitment to sustainability can be an important selling point and help you market your business to forward-thinking buyers.

Employee Considerations When Selling Your Business

Naturally, selling your business demands clear communication with your hard-working team members. It’s ultimately up to the future owner as to whether your employees will continue to work for your company. However, sellers can still negotiate retention bonuses to keep key workers employed.

Furthermore, you may need to ensure that employee contracts are in place and updated. This will preserve your employees’ workers’ compensation package, bonus structure, and other forms of compensation following the transition.

Selling With a Broker

Selling your business with the assistance of a broker can streamline every aspect of the sales process. Not only can Sunbelt Business Brokers help you secure a fair price for your company, but we also offer expert guidance on the logistics of the transaction.

Sunbelt Business Brokers can help you take the next steps in the process. Contact us today to get started with selling your small or medium-sized business.