Selling a business can be an exciting yet bittersweet experience. After years of hard work and dedication, selling represents an opportunity to cash in and move on.
It can also symbolize stepping away from something you love and starting a new chapter in your life.
Beyond the emotional aspects, selling a business is also a demanding task in and of itself. Many business owners need help knowing where to start.
At Massingill Attorneys and Counselors at Law, we help business owners sell their businesses efficiently and effectively.
Our skilled business attorneys work closely with clients to ensure the process of selling their businesses goes as smoothly as possible.
From preparing a company to be sold to the final considerations after closing a deal, we have the experience to get the sale to the finish line.
Contact Massingill today and schedule a consultation.
Selling a Business Checklist
Knowing where to start is one of the most challenging aspects of selling a business. There are a few steps to selling a business that owners should take before even looking for prospective buyers.
Once you identify a buyer, you must keep your eye on the prize and follow through until you close the deal. The following steps present a general guideline for what business owners should expect when selling their business.
Understand the Value of Your Business
Before finding a buyer, it is critical to have an in-depth understanding of the value of your business. Gather tax documents, financial statements, contracts, intellectual property documents, and other relevant business documents.
Get a firm understanding of your business’s market positioning and the value it might bring to prospective buyers.
Accountants, valuation experts, lawyers, and business brokers can help you understand your company’s value in the current market.
Understand the Rules Governing the Sale of a Business in Texas
Business owners must follow federal and state rules and regulations when selling their business in Texas. Further, depending on the industry your company is engaged in, there could be further legal considerations.
One critical concern is that companies must maintain their licenses and permits to continue operating legally after a sale.
And there are taxes on selling a business. The implications of such taxes play a significant role in the overall financials of any deal. Knowing how the sale will be taxed will help you get what you want from the exchange.
An experienced business attorney will help you understand the rules, regulations, and tax implications that might be present when selling your company.
Understand What You Are Selling
Business owners can engage in two primary types of transactions when selling their business.
Some companies are best suited for an asset sale, in which you sell the business’s assets without selling the business entity. You can sell both tangible and intangible assets, such as patents, for a profit during an asset sale.
Other businesses are better suited for an ownership sale, where you sell the entire entity to a new owner. Assets generally stay with the company after an ownership sale, unless otherwise agreed to.
Find Potential Buyers
After preparing to sell your company, it is time to identify and pursue potential buyers. Some business owners already have a buyer in mind before selling their business.
Others must find buyers who will be a good fit. A business broker can be a valuable asset when looking for buyers.
Negotiate a Sale Agreement
You must negotiate an initial sales agreement once you find potential buyers. Knowing how to negotiate when selling a business is critical to a successful sale.
Consider what your company might be worth to prospective buyers, and continually work to improve your negotiating position.
Coming to terms on a master sale agreement will provide the groundwork for the final steps in the sale process. An experienced business attorney from Massingill can help you negotiate this document.
Due Diligence
Due diligence provides the buyer with a valuable opportunity to analyze the state of your company and ensure they are getting what they are paying for.
Third-party financiers are also usually involved in the due diligence process. It is critical to ensure all business records and other documents are easily accessible before due diligence starts.
Notify Employees
Deciding when to notify employees is a delicate matter that differs for every business owner. It is essential to let employees know how the sale will affect their positions.
If employees feel caught off guard, there is a risk that they might leave the company before you close the deal.
Close the Deal
Closing is one of the most critical junctures of selling a business. During closing, the buyer pays for the company while the seller gives up control. If the deal is an asset sale, the seller turns over the business’s assets to the buyer.
Closing involves complicated and legally essential documents, such as bills of sale, lease assignments, titles, promissory notes, closing statements, and other critical documents.
Can You Avoid Paying Taxes When Selling a Business?
You must pay all taxes owed to the federal and state governments after a sale. However, there are several tax strategies business owners can employ to minimize their tax burden.
Understanding the tax implications of any business sale before formally beginning the sale process is critical. Many tax strategies are best used when negotiating a deal with a prospective buyer. A skilled tax attorney can help identify specific tax strategies that might work with the sale of your business.
How Can a Business Law Attorney Help?
Business litigation attorneys can provide valuable services throughout the entire business sale process. Before you pursue buyers, a lawyer can help you understand your business’s value and identify potential legal options to increase it.
An attorney can also help you understand the rules and regulations governing the sale. When negotiating a deal, a skilled attorney can protect your interests and help you find the best deal possible.
Finally, attorneys can facilitate closing the deal and ensure the final sale reflects your intentions.
At Massingill, we have the skill and experience to enable business sales from start to finish. Contact us today!
Joshua Massingill
Joshua Massingill is an attorney practicing in Austin, Texas. He serves on the Texas State Bar’s Law Practice Management Committee, the Leander Educational Excellence Foundation (LEEF) Board of Directors, and the Success-Werx Board of Advisors. He mentors young entrepreneurs in Leander ISD’s INCubatorEDU program and is active in his church.
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