Selling Your Business?
November 5, 2020
Selling a business can have a long-lasting impact on your life and requires significant time and dedication to ensure a smooth and successful transfer. If you are considering selling your business, there are crucial steps you should take to minimize risk and ensure that you are adequately compensated. There are important decisions that must be made, and each decision comes with certain legal and tax consequences. Additionally, focusing on the important aspects of selling your business can become difficult while you are still running it. Fortunately, the experienced lawyers at McClanahan Powers are available to provide counsel and representation throughout the entire process.
What to Consider When Selling Your Business
To successfully sell your business in Virginia or Washington D.C., it is critical to understand the type of business you are selling and how you want to go about selling it. The following issues should be considered when you prepare to sell your business:
- It is important to review and understand your Articles of Organization. If your Articles of Organization contain provisions regarding the transfer of ownership of your business, those govern how you may sell. However, where such a provision does not exist, the laws of the State will govern. Additionally, it is possible to amend the Articles of Organization so that it provides the steps you must take to transfer ownership of your business. This can be done by completing and submitting an Articles of Amendment form to the Secretary of State.
- You should try your best to eliminate any issues that might make a buyer less inclined to purchase your business. This could mean anything from handling any lawsuits to which your company is currently a party to remedying any compliance issues that you may be experiencing. Other important tasks prior to negotiating a sell might include ensuring proper title to any assets owned by your company and ensuring licenses and permits are up-to-date and not likely to expire in the near future.
- When selling your business, it is important to provide all relevant financial information to the buyer. A buyer will want to see all financial statements, including balance sheets, statements of shareholders’ equity, income statements, and cash flow statements. A buyer will want to know what assets and liabilities are held by the company. Additionally, your buyer must know what assets of your company you are willing to part with and which ones you’d like to keep, if any.
- When selling your business, it will be important to both parties, but especially the buyer, to have a smooth plan to transfer the entity. This means keeping the buyer informed of details outside of finances. A qualified buyer will be interested to see what your company’s purpose and policies are. It’s good practice to notify them of any lease agreements and possibly help to renegotiate such agreements. It is also important that they are informed of all assets and inventory and whether you plan to continue to have some part in the company as an employee, officer, or in some other role.
- Consider how you want to sell your business. There are different ways to sell your business, some of which may be more beneficial to you as the seller but less appealing to a buyer. Conversely, some ways are seen as more favorable to the buyer.
- Decide whether you are looking to sell the entire business or the assets of the business. Deciding on what to sell has certain tax implications on you as the seller, as well as the buyer. In the sale of a company, generally only the seller will be taxed for his gains. However, this also means that the buyer is purchasing all liabilities of the company, including its debts. This can include past lawsuits or new lawsuits stemming from the wrongful conduct of the previous owner, as well as other debts not currently reflected in the company books. Alternatively, you can decide to sell the assets of your company. This is preferable to buyers since they aren’t purchasing the company in its entirety.
- Locating a buyer can be a long process. There may be many buyers who suggest they are interested in purchasing your company. However, many buyers may not be as willing as the let on, or they might not have the ability to purchase your company. At the risk of divulging too much business information, you’ll want to ensure that potential buyers are serious about purchasing your business and have the funds to do so. You’ll also want to ensure they have previous business experience to ensure the future success of your company.
- Pay close attention to the contracts and other documents you sign before and upon the transfer of ownership. Any contract signed will govern the purchase of something, and courts are generally not open to interpreting a contract by anything other than what is on the face of that document. As such, it is important that you negotiate terms with the buyer and understand those terms so that both parties remain satisfied with the sale. Aside from a contract for the sale and purchase of your company, it is important to have a contract regarding payment for the sale. These financing documents will protect you in the future should the buyer cease to make payments for the purchase.
In the course of completing the steps above, it is best to maintain confidentiality on your part and the buyer’s part throughout the whole process. This can ensure that only you and the buyer are privy to contract terms and business information that could harm the company should it become available to the public.
If You Are Thinking About Selling Your Business, Call the Law Office of McClanahan Powers, PLLC
Selling a business can seem like a burdensome or daunting task. You may find yourself intimidated by all the decisions you have to make, and the steps required to make a successful sale. If you are interested in selling your business in the Virginia or D.C. area, contact the law office of McClanahan Powers, PLLC. Our experienced attorneys can provide you with the best strategy for selling your business so that it is favorable to you. Visit our website or call (703) 520-1326 to schedule your consultation today.