It can be hard to decide to sell your company.It can free up assets and relieve you from liability.If you want to sell your business, begin negotiations with one or more potential buyers.Once negotiations are complete, you should draft a sale agreement.
Step 1: An introduction is needed.
The transaction should be mentioned in a few sentences in your introduction.The introduction will usually begin with the word "whereas."All the important terms may be defined by your introduction in smaller transactions.Your introduction may be smaller in larger transactions because important terms will be defined elsewhere.The introduction doesn't usually have a legal effect.Background information is provided when it is there to introduce the transaction.You need to state in the agreement that you want the introduction to carry legal effect.
Step 2: Understand important terms.
A clear understanding of what certain terms mean is ensured by definitions.A court may end up interpreting your agreement if you and the buyer disagree over definitions.Don't define irrelevant terms.A lengthy definitions section will take away from the agreement itself.The following terms should be clearly defined in your sale agreement.
Step 3: The transaction should be described.
The sale transaction will be described in this section.There will be sections on the purchase price, adjustments, and liabilities.The acquisition model you and the buyer agreed on is here.When drafting these sections, make sure you take the tax status of your business into account.
Step 4: It's a good idea to draft warranties.
The buyer's statements of fact are listed in the warranties and representations section of the agreement.The buyer relies on these statements when buying your business.The due diligence process will be reflected in the representations.The draft language in this section does not give you any responsibility for the warranties and representations listed in the sale agreement.The buyer won't want to take responsibility for anything that happens before closing.The best way to draft this section will be negotiated by you and the buyer.Legal status will usually be addressed by the representations.
Step 5: There should be closing conditions included.
The conditions set out what needs to be done in order to complete the transaction.The buyer needs to be kept up-to-date on changes in the business until the closing date.After the sale agreement is signed, you will usually agree to limit your own ability to make business decisions.You have to list the deliverables that need to be done in order to finalize the sale.The bill of sale agreements are usually the deliverables.
Step 6: The boilerplate should be inserted.
Common language should be included in every contract at the end of the agreement.These provisions help courts and parties understand agreements.Provisions relating to contract interpretation, notices, amendments, parties, dispute resolution, and enforceability are typically included.
Step 7: Exhibits are included.
Exhibits can be used to fill in the gaps and list what is meant by the provisions.Your contract should reference any exhibit you include at the end of it.Cash accounts receivable, inventory equipment contracts, intellectual property, and financial statements are some of the common exhibits in sale agreements.
Step 8: The document needs to be signed.
The correct spelling of each party and their official title are included in the signatures page of your sale agreement.When you and the buyer sign and date the agreement, it will be executed.
Step 9: Sign a covenant not to compete.
Almost every buyer will require you to sign a CNC in addition to a signed sale agreement.You have to promise that you won't set up a business that competes with the one you just sold.No buyer is likely to purchase your business if you don't have this type of promise.You will need to agree not to compete with the buyer in order for a CNC to be presented to you.The buyer will not be able to stop you from opening a business in another country if the covenant is limited to geography and time.You need to promise not to solicit any of your old customers for a period of time.You must promise not to entice employees to leave the business you just sold.You won't be able to discuss or distribute confidential information about the business you just sold.
Step 10: Accept the note.
If you are going to use a promissory note to complete your sale, you need to have this signed and attached to your agreement.The buyer will pay you the money you are owed with a promissory note.Depending on how well the business is doing, it might provide for periodic payments, interest payments and/or fluctuations.
Step 11: Request something.
If you accept a promissory note for the sale of your business, you should be able to ask for some security for your payment.An executed guarantee from the buyer's principals might include security interests in the assets being sold.If you are asking for security interests in assets, you will have to give up your interest in the bank.The bank will require you to sign a subordination agreement if it wants to hold a more senior interest than you.
Step 12: The titles should be transferred to the buyer.
The sale agreement requires you and the buyer to do things.The sale agreement will not be enough to achieve these acts.Other documents will have to be executed in order to achieve these acts.Any personal property will be stated in your sale agreement.The business will be sold.Signing and transferring title documents is necessary to transfer title to the property.The transfer document for personal property will be a bill of sale.Different types of property require different title transfer documents.To make sure title to your business is transferred to the buyer, check with your attorney.
Step 13: Hire a lawyer.
It will take many complex tasks to sell your business.A lawyer can help you navigate the process.A lawyer will be able to negotiate the sale of your business, draft acceptable documentation, and finalize the deal.Contact your state bar association's lawyer referral service to find a good attorney.After you answer a few questions, your state bar will contact a number of qualified lawyers.If you can't afford a full-service lawyer, you should hire a lawyer to review the most important documents in the process.Make sure potential lawyers feel comfortable completing all of the tasks when you talk to them.Make sure you are comfortable with the fee arrangement.Business lawyers can be expensive, but you usually pay for what you get.
Step 14: Get in touch with interested buyers.
You should keep an eye on the market before you decide to sell your business.You can create and maintain a database of companies that you compete with.Reach out to businesses in your database when you're ready to sell.It's a good idea to reach out to potential buyers in a discreet way.You don't want investors, shareholders or executives to be scared by your plans.You can make a discreet phone call to potential buyers.Asking for a joint venture.Asking a third party to contact you.
Step 15: There is a nondisclosure agreement.
Once you have found a buyer, you will want them to sign a non-disclosure agreement.Buyers will want to know about your revenue, profitability, cash flow, growth rates, employees, products, and intellectual property during initial sale discussions.Keeping this information confidential will be helped by an executed NDA.Any information stamped "confidential" will be treated as such by a properly drafted NDA.No information can be given to individuals or entities that are not parties to the agreement.You should include language that requires potential buyers to return any and all information you give them.You can send requested information to potential buyers once an NDA is executed.Give your potential buyers enough information to make an informed decision.Businesses that are seasoned will know what to ask.Do not feel obligated to send information you don't need.Potential buyers will pretend to be interested in you so they can get your confidential information.
Step 16: There are letters of intent to be requested.
Interested buyers will look over requested summary-level documents to determine if your business is a good purchase option.A buyer will send a letter of intent if they like what they see.Every possible buyer should give you an LOI.The buyer will make an initial offer if certain factors are met.You are not supposed to negotiate with any other businesses when buyers request a period of exclusiveness.If you are in negotiations with more than one business, you should not sign an LOI.Allow a period of exclusiveness if you think a particular buyer is a good fit.You can move forward with the sale with this show of good faith.
Step 17: Assist with due diligence.
You will usually only be dealing with one potential buyer after LOIs have been sent.The buyer will send you a list of due diligence requests.The buyer will be checking your records during the period of due diligence to make sure the purchase is a good idea.Most buyers will ask for an overview of your company, which will include why you are selling, any prior sale attempts, your business plans, market reviews, and the organizational structure of the business.The employee files include a list of your employees, what they are paid, who the key employees are, any employment contracts you have, and whether any employees have sued you.Financial results include annual statements, cash flow analyses, disclosures, and cash restrictions.Backlogs, recurring streams, available channels, and accounts receivable will be included in the revenue.Your business may have intellectual property.There are any fixed assets and facilities that you have.Accounts payable, leases, debts, and collateral are any of the liabilities you have.Any equity you have given out.pending lawsuits and tax audits are some of the legal issues your business is facing.
Step 18: Discuss the model of acquisition.
There are two main types of agreements that you and the buyer can enter into.A majority of your business's stock will be purchased by the buyer.The business's debts and obligations will be taken on by the buyer.The buyer purchases all of your assets, both tangible and intangible.You won't have a business to run because your shell will stay in place.The asset sale benefits the buyer the most because they can begin depreciating the assets sooner.Your only tax liability will be on the long-term capital gains of the stock you sell, so you should request an entity sale.The buyer of an asset sale won't take responsibility for existing debts.You will still have to pay off loans and fight lawsuits.Unless explicitly agreed otherwise, the buyer will take responsibility for any existing debts in an entity sale.
Step 19: The price should be negotiated.
The LOI offer is more of an introductory, soft offer, so the buyer will usually make the first firm offer.The offer will usually come in the form of a purchase agreement from the buyer's perspective.The price is usually buyer friendly because the buyer controls the drafting of the document.Negotiating back and forth until an agreement is reached is how to analyze the offer.Accepting a lump-sum payment might be difficult if the purchase price is large.Large amounts of cash on hand is not often used by buyers.A payment is made between different types of assets.There is a payment due at different times.The buyer will usually give you some of the payment after the deal is closed.