For some business owners, there comes a time when selling a business is the best option for the business and the business owner at that time. This circumstance can present itself for a variety of reasons and it is important that business owners are protected, and take appropriate measures to protect themselves, when selling a business.
A sales agreement that is correct and has all the terms of the sale for the assets of a business or stock of a company is crucial. The agreement should carefully contain everything that will be purchased, including customer lists, business assets, goodwill and intellectual property.
It is important that a sales agreement is properly drafted and includes, at a minimum, the names of the seller, buyer and business name; a list of assets being sold and a list of inventory included in the sale; the purchase price and allocation of assets; payment terms between the parties; representations of warranties of either the seller or buyer; access to business information and determination of daily running of the business prior to the sale closing; fees; date of closing; and any necessary compliance with federal, state or local laws.
In addition to the important considerations mentioned that should be included in the purchase agreement, another important step in the process of selling a business is valuing the business. Placing a value on the business can be a significant step for the party selling the business. An independent valuation or appraisal of the business should be performed which will help with the valuation of both assets and intangible assets such as business goodwill and going-concern. The worth of the business should likely be greater than simply the value of assets.
Because of the importance the decision to sell likely holds for a business owner, thorough knowledge and understanding of the process of selling a business, prior to endeavoring into the process, can be essential to completion of a successful transaction.
Source: The U.S. Small Business Administration, “Selling Your Business,” Accessed Oct. 27, 2014