Sell Your Business: The Step by Step Legal Guide

Intro. Using This Book to Sell Your Business......Page 18
B. How This Book Can Help......Page 19
C. Working Efficiently with Lawyers, Accountants, and Other Professionals......Page 20
1. Deciding Whether—And When—To Sell......Page 24
A. Deciding Whether or Not to Sell Can Be Agonizing......Page 25
B. Do You Have a Saleable Business?......Page 26
C. Working Out Problems With Your Co-Owners......Page 30
D. Choosing the Best Time to Sell......Page 31
F. Staying Involved With Your Business......Page 33
G. Protecting Your Future Ability to Earn a Living......Page 34
2. The Key Steps in Selling Your Business......Page 36
B. Preparing Your Business for Sale......Page 37
D. Marketing Your Business......Page 38
E. Negotiating the Deal: Key Sale Issues......Page 39
G. Closing Your Sale......Page 40
3. The Key Legal Issues in Selling Your Business......Page 42
A. Take Presale Legal Protections......Page 43
B. Understand the Differences Between Selling the Business Entity or Just Its Assets......Page 44
C. Be Clear on What You’ll Sell and What You’ll Keep......Page 45
D. Understand the Transfer of Intellectual Property......Page 46
E. Build in Legal Protections If the Buyer Stops Paying......Page 47
G. Limit Your Legal Liabilities to Third Parties Once the Business Changes Hands......Page 48
H. Protect Yourself Against Unintended Liability to the Buyer......Page 51
I. Comply with State and Local Laws That May Affect Your Sale......Page 52
4. Tax Considerations When Selling Your Business......Page 54
A. An Overview of Key Tax Issues......Page 55
B. Understanding the Federal Tax Rate That Applies to Your Sale......Page 57
C. Tax Issues When Selling the Business Entity......Page 58
D. Selling the Assets of a Business......Page 60
E. Asset Sale by a C Corporation......Page 63
G. Asset Sale by a Sole Proprietorship or Single-Member LLC......Page 65
I. Allocation of the Purchase Price......Page 66
5. Putting a Price on Your Business......Page 70
A. There’s No Universal Pricing Formula: Many Factors Affect Price......Page 71
B. Sales of Comparable Businesses......Page 72
D. The Asset-Based Approach......Page 73
E. Industry Formulas and Rules of Thumb......Page 74
F. How Appraisers and Other Experts Can Help You Set the Price......Page 75
G. Putting It All Together to Price Your Business......Page 76
6. Working with Lawyers, Accountants, and Brokers......Page 78
A. Lawyers......Page 79
B. Accountants......Page 82
C. Business Brokers......Page 84
7. Preparing Your Business for Sale......Page 90
A. Make Your Business Attractive to Buyers......Page 92
B. Get Your Paperwork in Order......Page 97
C. Show How Profitable Your Business Really Is: Restate Your Profit and Loss Statement......Page 104
D. Take Steps to Improve Business Profitability......Page 105
E. Add Value to Your Lease......Page 108
G. Clean Up Existing Problems......Page 110
I. Prepare a Checklist of Presale Tasks......Page 114
8. Finding the Right Buyer......Page 116
A. First, Look for Buyers Close to Home......Page 118
B. Strategic Buyers......Page 121
C. Special Concerns When Approaching Competitors......Page 124
D. Marketing Your Business by Word of Mouth......Page 125
E. Marketing Your Business Through Advertising......Page 126
F. How Business Brokers Can Help Find Buyers......Page 129
G. How to Quickly Size Up Prospects......Page 130
9. Structuring the Sale......Page 134
A. Asset Sale vs. Entity Sale......Page 135
B. Lump Sum Payment vs. Installments......Page 140
C. How to Structure an Installment Sale......Page 141
D. Ten Strategies to Protect Yourself in an Installment Sale......Page 142
E. Doing Future Work for the Business......Page 147
F. Restrictions on What You Do Next: Noncompete Agreements......Page 150
G. The Future of Key Employees......Page 151
H. Keeping the Buyer Motivated......Page 152
10. The Investigation Stage: How Sellers and Buyers Check Each Other Out......Page 154
A. The Buyer’s Investigation of Your Business......Page 157
B. Honesty Is the Best Policy: The Importance of Full Disclosure......Page 158
C. Business Information the Buyer Will Want to See......Page 160
D. Protecting Sensitive Information with a Confidentiality Agreement......Page 170
E. Why and How You Should Check Out the Buyer......Page 172
F. Practical Steps for Evaluating a Buyer......Page 174
11. Drafting a Letter of Intent......Page 178
A. Why Use a Letter of Intent?......Page 179
B. What to Put In Your Letter of Intent......Page 180
D. Format for a Letter of Intent......Page 181
12. Preparing the Sales Agreement and Other Legal Documents......Page 188
A. Overview of Your Sales Agreement......Page 189
B. Related Legal Documents......Page 192
C. Well-Drafted Documents Are Crucial......Page 193
D. Preparing Your Sales Agreement and Related Legal Documents......Page 194
E. How to Prepare Attachments to Your Sales Agreement......Page 195
G. Amending Your Sales Agreement......Page 196
13. Who’s Selling, Who’s Buying—And What’s Being Sold......Page 198
Table of Contents......Page 10
A. Naming the Parties......Page 199
B. Identifying Your Business and What You’re Selling in an Asset Sale......Page 202
C. Identifying What You’re Selling in an Entity Sale......Page 205
14. The Sale Price and Terms of Payment......Page 208
A. Sale Price: Asset Sale......Page 209
B. Inventory: Asset Sale......Page 212
C. Dealing With the Purchase of Accounts Receivable: Asset Sale......Page 213
D. Sale Price: Entity Sale......Page 214
E. Deposit......Page 215
F. Payment at Closing......Page 216
G. Promissory Note......Page 217
H. Security for Future Payment—Asset Sale......Page 218
I. Security for Future Payment—Entity Sale......Page 219
15. Dealing with Liabilities and Representations......Page 222
A. Liabilities in an Asset Sale......Page 223
B. Liabilities in an Entity Sale......Page 226
D. Seller’s Representations......Page 227
E. Buyer’s Representations......Page 231
16. Payments for Noncompete and Consultant Deals......Page 232
A. Agreeing Not to Compete With the Business After the Sale......Page 233
B. Agreeing to Work for the Business After the Sale......Page 234
17. Other Important Legal Language for the Sales Agreement......Page 236
A. Contingency Clause......Page 237
B. Closing Arrangements......Page 238
C. Dispute Resolution Clause......Page 240
D. Technical Contract Clauses......Page 241
E. Additional Optional Clauses......Page 243
18. Signatures on a Sales Agreement......Page 244
B. Required Signatures for an Entity on a Sales Agreement......Page 245
C. A Spouse’s Signature on the Sales Agreement......Page 247
E. The Typical Formats for Signing a Sales Agreement......Page 248
F. Accepting Personal Responsibility for Commitments in a Sales Agreement......Page 250
H. Signing the Sales Agreement......Page 252
19. Promissory Notes and Other Installment Payment Documents......Page 256
A. The Promissory Note......Page 257
B. The Security Agreement......Page 264
C. The UCC Financing Statement......Page 271
D. Escrow Agreement for Entity Sale......Page 273
20. Bill of Sale, Lease Assignment, an Other Documents for Transferring Your Business......Page 280
A. Bill of Sale—Asset Sale......Page 281
B. Bulk Sales Compliance......Page 285
C. Assignment of Lease—Asset Sale......Page 289
D. Assignment of Other Contracts—Asset Sale......Page 292
E. Assignment of Intellectual Property......Page 294
G. Transferring Your Entity......Page 296
H. Assignments in an Entity Sale......Page 299
21. Documents for Noncompete and Future Work Commitments......Page 302
A. Covenant Not to Compete......Page 303
B. Contract for Employment......Page 307
C. Contract for an Independent Contractor......Page 310
22. Preparing for a Smooth Closing......Page 316
A. Where and When to Hold the Closing and Who Should Attend......Page 317
B. Documents for Transferring Assets......Page 318
E. Moving On......Page 320
Appendix A How to Use the CD-ROM......Page 322
Appendix B Sample Purchase Agreements......Page 328
Asset Sale of a Restaurant by One Sole Proprietor to Another......Page 329
Entity Sale of a Bookstore by the Two Shareholders to an Individual......Page 335
Asset Sale of a Landscaping Business by a Single-Owner LLC to a Partnership......Page 340
Appendix C Legal Forms......Page 348
IRS 8594, Asset Acquisition Statement and Instructions......Page 350
Checklist of Presale Tasks......Page 356
Potential Buyer Information......Page 358
Confidentiality Letter......Page 360
Attachment to the Sales Agreement......Page 362
Amendment of Sales Agreement......Page 364
Promissory Note......Page 366
Security Agreement for Asset Sale......Page 368
Security Agreement for Entity Sale......Page 370
UCC Financial Statement and Addendum......Page 372
Escrow Agreement for Stock Certificates......Page 376
Escrow Agreement for LLC Transfer Certificates......Page 378
Bill of Sale for Business Assets......Page 380
Statement Regarding Absence of Creditors......Page 382
Certificate of Acknowledgment of Notary Public......Page 383
Assignment of Lease......Page 384
Assignment of Contracts......Page 386
Consent to Assignment of Contract......Page 388
Assignment of Intellectual Property......Page 390
Certificate of Acknowledgment of Notary Public......Page 391
Consent to Sale of Assets by Corporate Board of Directors......Page 392
Consent to Sale of Assets by Corporate Shareholders......Page 394
Consent to Sale of Assets by LLC Members......Page 396
Consent to Sale of Assets by Partners......Page 398
Covenant Not to Compete......Page 400
Independent Contractor Agreement......Page 402
Closing Checklist for an Asset Sale......Page 404
Closing Checklist for an Entity Sale......Page 406
Index......Page 408
Related Products......Page 424