The Complete Guide to Selling a Business

by Steingold, Fred S.

• ISBN13: 9781413303629
• ISBN10: 1413303625
• Edition: 2nd
• Format: Paperback
• Copyright: 2005-10-30
• Publisher: Ingram Pub Services

Summary

A small business owner who wants to sell a business runs into many potentially thorny legal issues. Most important is preparing a sales agreement that covers all the key concerns, from price and payment terms to liability protection and restrictions on future competition. This comprehensive legal guide provides step-by-step advice on preparing a solid sales agreement and other crucial documents, including promissory notes and the assignment of a lease. Legal Guide to Selling a Business covers all aspects of selling a business, including getting the business ready for sale, setting a price, finding good buyers, and preparing and signing a sales agreement.

Table of Contents

Introduction: Using This Book to Sell Your Business
Is This Book for You?	2	(1)
How This Book Can Help	3	(1)
Working Efficiently With Lawyers, Accountants, and Other Professionals	4
Part 1: Overview of the Process
Deciding Whether--And When--To Sell
Deciding Whether or Not to Sell Can Be Agonizing	2	(2)
Do You Have a Saleable Business?	4	(6)
Working Out Problems With Your Co-Owners	10	(2)
Choosing the Best Time to Sell	12	(2)
If You Need to Leave the Business, But the Time Isn't Right to Sell	14	(1)
Staying Involved With Your Business	15	(2)
Protecting Your Future Ability to Earn a Living	17
The Key Steps in Selling Your Business
Figuring Out What Your Business Is Worth	2	(1)
Preparing Your Business for Sale	3	(1)
Creating a Plan for the Future	4	(1)
Marketing Your Business	4	(1)
Negotiating the Deal: Key Sale Issues	5	(1)
Signing a Sales Agreement	6	(1)
Closing Your Sale	7
The Key Legal Issues in Selling Your Business
Take Presale Legal Protections	3	(1)
Understand the Differences Between Selling the Business Entity or Just Its Assets	3	(4)
Be Clear on What You'll Sell and What You'll Keep	7	(1)
Understand the Transfer of Intellectual Property	8	(1)
Build in Legal Protections If the Buyer Stops Paying	8	(2)
Assure Your Ability to Earn a Living Later: Guidelines for Noncompete Agreements	10	(1)
Limit Your Legal Liabilities to Third Parties Once the Business Changes Hands	11	(4)
Protect Yourself Against Unintended Liability to the Buyer	15	(2)
Comply With State and Local Laws That May Affect Your Sale	17
Tax Considerations When Selling Your Business
An Overview of Key Tax Issues	2	(3)
Understanding the Federal Tax Rate That Applies to Your Sale	5	(1)
Tax Issues When Selling the Business Entity	6	(4)
Selling the Assets of a Business	10	(4)
Asset Sale by a C Corporation	14	(3)
Asset Sale by an S Corporation	17	(1)
Asset Sale by a Sole Proprietorship or Single-Member LLC	18	(1)
Asset Sale by a Partnership or Multimember LLC	18	(1)
Allocation of the Purchase Price	19
Putting a Price on Your Business
There's No Universal Pricing Formula: Many Factors Affect Price	2	(2)
Sales of Comparable Businesses	4	(1)
The Income Valuation Approach	5	(2)
The Asset-Based Approach	7	(1)
Industry Formulas and Rules of Thumb	8	(2)
How Appraisers and Other Experts Can Help You Set the Price	10	(1)
Putting It All Together to Price Your Business	11
Working With Lawyers, Accountants, and Brokers
Lawyers	3	(4)
Accountants	7	(3)
Business Brokers	10
Part 2: Getting Ready to Sell
Preparing Your Business for Sale
Make Your Business Attractive to Buyers	3	(8)
Get Your Paperwork in Order	11	(11)
Show How Profitable Your Business Really Is: Restate Your Profit and Loss Statement	22	(2)
Take Steps to Improve Business Profitability	24	(4)
Add Value to Your Lease	28	(3)
Communicate With Employees about the Sale	31	(1)
Clean Up Existing Problems	32	(5)
Nail Down Vital Relationships With Customers and Suppliers	37	(1)
Prepare a Checklist of Presale Tasks	38
Finding the Right Buyer
First, Look for Buyers Close to Home	3	(6)
Strategic Buyers	9	(5)
Special Concerns When Approaching Competitors	14	(1)
Marketing Your Business by Word of Mouth	15	(1)
Marketing Your Business Through Advertising	16	(5)
How Business Brokers Can Help Find Buyers	21	(1)
How to Quickly Size Up Prospects	22
Structuring the Sale
Asset Sale vs. Entity Sale	3	(7)
Lump Sum Payment vs. Installments	10	(1)
How to Structure an Installment Sale	11	(2)
Ten Strategies to Protect Yourself in an Installment Sale	13	(7)
Doing Future Work for the Business	20	(5)
Restrictions on What You Do Next: Noncompete Agreements	25	(2)
The Future of Key Employees	27	(2)
Keeping the Buyer Motivated	29
The Investigation Stage: How Sellers and Buyers Check Each Other Out
The Buyer's Investigation of Your Business	4	(2)
Honesty Is the Best Policy: The Importance of Full Disclosure	6	(3)
Business Information the Buyer Will Want to See	9	(15)
Protecting Sensitive Information With a Confidentiality Agreement	24	(4)
Why and How You Should Check Out the Buyer	28	(2)
Practical Steps for Evaluating a Buyer	30
Drafting a Letter of Intent
Why Use a Letter of Intent?	2	(1)
What to Put in Your Letter of Intent	3	(2)
Why You Should Only Sign a Nonbinding Letter of Intent	5	(1)
Format for a Letter of Intent	5
Part 3: Preparing a Sales Agreement
Preparing the Sales Agreement and Other Legal Documents
Overview of Your Sales Agreement	2	(5)
Related Legal Documents	7	(1)
Well-Drafted Documents Are Crucial	8	(1)
Preparing Your Sales Agreement and Related Legal Documents	9	(2)
How to Prepare Attachments to Your Sales Agreement	11	(1)
Steps in Finalizing Your Sales Agreement and Other Documents	12	(1)
Amending Your Sales Agreement	13
Who's Selling, Who's Buying---And What's Being Sold
Naming the Parties	2	(6)
Identifying Your Business and What You're Selling in an Asset Sale	8	(4)
Identifying the Business and What You're Selling in an Entity Sale	12
The Sales Price and Terms of Payment
Sale Price: Asset Sale	2	(5)
Inventory: Asset Sale	7	(2)
Dealing With the Purchase of Accounts Receivable: Asset Sale	9	(2)
Sale Price: Entity Sale	11	(1)
Deposit	12	(1)
Payment at Closing	13	(2)
Promissory Note	15	(2)
Security for Future Payment: Asset Sale	17	(1)
Security for Future Payment: Entity Sale	18
Dealing With Liabilities and Representations
Liabilities in an Asset Sale	3	(4)
Liabilities in an Entity Sale	7	(1)
Representations: What They Are and Why They Matter	8	(1)
Seller's Representations	9	(5)
Buyer's Representations	14
Payments for Noncompete and Consultant Deals
Agreeing Not to Compete With the Business After the Sale	2	(3)
Agreeing to Work for the Business After the Sale	5
Other Important Legal Language for the Sales Agreement
Contingency Clause	2	(1)
Closing Arrangements	3	(3)
Dispute Resolution Clause	6	(2)
Technical Contract Clauses	8	(4)
Additional Optional Clauses	12
Signatures on a Sales Agreement
Required Signatures for Sole Proprietors on a Sales Agreement	2	(1)
Required Signatures for an Entity on a Sales Agreement	3	(2)
A Spouse's Signature on the Sales Agreement	5	(2)
Signature Clause in a Sales Agreement	7	(1)
The Typical Formats for Signing a Sales Agreement	8	(3)
Accepting Personal Responsibility for Commitments in a Sales Agreement	11	(3)
Signing the Sales Agreement	14
Part 4: Preparing the Promissory Note and Other Sales Documents
Promissory Notes and Other Installment Payment Documents
The Promissory Note	2	(10)
The Security Agreement	12	(10)
The UCC Financing Statement	22	(3)
Escrow Agreement for Entity Sale	25
Bill of Sale, Lease Assignment, and Other Documents for Transferring Your Business
Bill of Sale: Asset Sale	3	(5)
Bulk Sales Compliance	8	(4)
Assignment of Lease: Asset Sale	12	(1)
Assignment of Other Contracts: Asset Sale	13	(8)
Assignment of Intellectual Property	21	(2)
Approval of Entity's Sale of Assets	23	(3)
Transferring Your Entity	26	(1)
Assignments in an Entity Sale	27
Documents for Noncompete and Future Work Commitments
Covenant Not to Compete	2	(7)
Contract for Employment	9	(3)
Contract for an Independent Contractor	12
Part 5: Closing the Deal
Preparing for a Smooth Closing
Where and When to Hold the Closing and Who Should Attend	2	(2)
Documents for Transferring Assets	4	(2)
Documents for Transferring an Entity	6	(1)
Handling Last-Minute Problems	6	(2)
Moving On	8
Appendixes
A. How to Use the CD-ROM
A. Installing the Form Files Onto Your Computer	2	(1)
B. Using the Word Processing Files to Create Documents	3	(2)
C. Using PDF Forms	5
B. Sample Sales Agreements
Sample #1: Asset Sale of a Restaurant by One Sole Proprietor to Another	2	(8)
Sample #2 Entity Sale of a Bookstore by the Two Shareholders to an Individual	10	(7)
Sample #3 Asset Sale of a Landscaping Business by a Single-Owner LLC to a Partnership	17
Index