Selling a small business is a complex process that requires the help of an accountant, broker, and most importantly, a business law attorney. Whether you will gain profit from the transaction depends on several factors, such as the timing of the sale, the reason for the sale, and the business’s structure and its operations. The business sale requires a lot of focus and time to estimate what you will be getting in exchange and how you plan to handle the profit.
Reasons for Selling your Small Business
One of the common questions a potential buyer asks before considering to purchase your business is why you want to sell it. Owners may want to sell it because of several reasons, including partnership disputes, retirement, becoming overworked, death or illness, and others. However, it becomes quite difficult to attract buyers when the business is not profitable, which is why you need to consider its readiness, the right timing, and the business’s ability to sell.
Take the example of WhatsApp, a popular messaging app that grew its user base over time, attracted several high bidders, and finally sold it to the social media giant, Facebook, for a fortune. There are numerous characteristics that can make your small business appear more lucrative and appealing, such as consistent income, increasing profits, the number of small and big contracts, and a strong customer base.
Steps for Selling a Small Business
The following are the major steps you need to take to sell a small business:
- Letter of Intent: The buyer outlines the price and terms and conditions to which you have informally agreed to in a nonbinding letter. It also promises confidentiality, allowing them to investigate the different aspects of your business.
- Due Diligence: Each party has a specified time limit in which they scrutinize each other thoroughly in order to determine whether they should move forward with the deal.
- Purchase Agreement: If you and the buyer manage to move past the due diligence step, the attorneys of each party will discuss and negotiate the details of the purchasing agreement, any supplementary contracts like consulting or non-compete contracts, and financing between the parties.
- Compliance with State Law: While you proceed with the sale of your business, you need to notify the creditors about the business transaction, so that they can protect their interests accordingly. State law may also require the corporate stakeholders of the seller and/or buyer to vote on the transaction, both parties to obtain tax certificates, cash out minority interests, buy or transfer business licenses, etc.
- Closing the Deal: After all aspects have been discussed and agreed upon, the parties will sign necessary documentation for the transfer of ownership, security interests, promissory notes, and others. They will also fulfill the requirements of third-party lenders. Finally, you will receive the down payment, the buyer will get the ownership, and the business transaction will be complete.
Each step of the selling process requires the legal assistance of a business law attorney who ensures everything goes smoothly and without any complications. If you are planning to sell your small business in Northeast Ohio and surrounding areas, you should contact the Law Office of John C. Grundy at (330) 637-9030 or online to schedule a consultation and plan your way forward.