The Complete Guide to Selling a Business

Introduction

Your Companion for Selling Your Business

• Is This Book for You?
• Will You Still Need to Hire Lawyers, Accountants, or Other Professionals?

Part 1

Overview of the Process

1. Deciding Whether -- And When -- To Sell

• Deciding Whether or Not to Sell Can Be Agonizing
• Do You Have a Saleable Business?
• Working Out Problems With Your Co-Owners
• Choosing the Best Time to Sell
• If You Need to Leave the Business, But the Time Isn't Right to Sell
• Staying Involved With Your Business
• Protecting Your Future Ability to Earn a Living

2. The Key Steps in Selling Your Business

• Figuring Out What Your Business Is Worth
• Preparing Your Business for Sale
• Creating a Plan for the Future
• Marketing Your Business
• Negotiating the Deal: Key Sale Issues
• Signing a Sales Agreement
• Closing Your Sale

3. The Key Legal Issues in Selling Your Business

• Take Presale Legal Protections
• Understand the Differences Between Selling the Business Entity or Just Its Assets
• Be Clear on What You'll Sell and What You'll Keep
• Understand the Transfer of Intellectual Property
• Protect Yourself Against the Buyer Failing to Make Payments
• Assure Your Ability to Earn a Living Later: Guidelines for Noncompete Agreements
• Limit Your Legal Liabilities to Third Parties Once the Business Changes Hands
• Protect Yourself Against Unintended Liability to the Buyer
• Comply With State and Local Laws That May Affect Your Sale

4. Tax Considerations When Selling Your Business

• An Overview of Key Tax Issues
• Understanding the Federal Tax Rate That Applies to Your Sale
• Tax Issues When Selling the Business Entity
• Selling the Assets of a Business
• Asset Sale by a C Corporation
• Asset Sale by an S Corporation
• Asset Sale by a Sole Proprietorship or Single-Member LLC
• Asset Sale by a Partnership or Multimember LLC
• Allocation of the Purchase Price

5. Putting a Price on Your Business

• There's No Universal Pricing Formula: Many Factors Affect Price
• Sales of Comparable Businesses
• The Income Valuation Approach
• The Asset-Based Approach
• Industry Formulas and Rules of Thumb
• How Appraisers and Other Experts Can Help You Set the Price
• Putting It All Together to Price Your Business

6. Working With Lawyers, Accountants, and Brokers

• Lawyers
• Accountants
• Business Brokers

Part 2

Getting Ready to Sell

7. Preparing Your Business for Sale

• Make Your Business Attractive to Buyers
• Get Your Paperwork in Order
• Show How Profitable Your Business Really Is: Restate Your Profit and Loss Statement
• Take Steps to Improve Business Profitability
• Add Value to Your Lease
• Communicate With Employees About the Sale
• Clean Up Existing Problems
• Nail Down Vital Relationships With Customers and Suppliers
• Prepare a Checklist of Presale Tasks

8. Finding the Right Buyer

• First, Look for Buyers Close to Home
• Strategic Buyers
• Special Concerns When Approaching Competitors
• Marketing Your Business by Word of Mouth
• Marketing Your Business Through Advertising
• How Business Brokers Can Help Find Buyers
• How to Quickly Size Up Prospects

9. Structuring the Sale

• Asset Sale vs. Entity Sale
• Lump Sum Payment vs. Installments
• How to Structure an Installment Sale
• Ten Strategies to Protect Yourself in an Installment Sale
• Doing Future Work for the Business
• Restrictions on What You Do Next: Noncompete Agreements
• The Future of Key Employees
• Keeping the Buyer Motivated

10. The Investigation Stage: How Sellers and Buyers Check Each Other Out

• The Buyer's Investigation of Your Business
• Honesty Is the Best Policy: The Importance of Full Disclosure
• Business Information the Buyer Will Want to See
• Protecting Sensitive Information With a Confidentiality Agreement
• Why and How You Should Check Out the Buyer
• Practical Steps for Evaluating a Buyer

11. Drafting a Letter of Intent

• Why Use a Letter of Intent?
• What to Put in Your Letter of Intent
• Why You Should Only Sign a Nonbinding Letter of Intent
• Format for a Letter of Intent

Part 3

Preparing the Sales Agreement

12. Preparing the Sales Agreement and Other Legal Documents

• Overview of Your Sales Agreement
• Related Legal Documents
• Well-Drafted Documents Are Crucial
• Preparing Your Sales Agreement and Related Legal Documents
• How to Prepare Attachments to Your Sales Agreement
• Steps in Finalizing Your Sales Agreement and Other Documents
• Amending Your Sales Agreement

13. Who's Selling, Who's Buying -- And What's Being Sold

• Naming the Parties
• Identifying Your Business and What You're Selling in an Asset Sale
• Identifying the Business and What You're Selling in an Entity Sale

14. The Sales Price and Terms of Payment

• Sale Price: Asset Sale
• Inventory: Asset Sale
• Dealing With the Purchase of Accounts Receivable: Asset Sale
• Sale Price: Entity Sale
• Deposit
• Payment at Closing
• Promissory Note
• Security for Future Payment: Asset Sale
• Security for Future Payment: Entity Sale

15. Dealing With Liabilities and Representations

• Liabilities in an Asset Sale
• Liabilities in an Entity Sale
• Representations: What They Are and Why They Matter
• Seller's Representations
• Buyer's Representations

16. Payments for Noncompete and Consultant Deals

• Agreeing Not to Compete With the Business After the Sale
• Agreeing to Work for the Business After the Sale

17. Other Important Legal Language for the Sales Agreement

• Contingency Clause
• Closing Arrangements
• Dispute Resolution Clause
• Technical Contract Clauses
• Additional Optional Clauses

18. Signatures on a Sales Agreement

• Required Signatures for Sole Proprietors on a Sales Agreement
• Required Signatures for an Entity on a Sales Agreement
• A Spouse's Signature on the Sales Agreement
• Signature Clause in a Sales Agreement
• Typical Formats for Signing a Sales Agreement
• Accepting Personal Responsibility for Commitments in a Sales Agreement
• Signing the Sales Agreement

Part 4

Preparing the Promissory Note and Other Sales Documents

19. Promissory Notes and Other Installment Documents

• The Promissory Note
• The Security Agreement
• The UCC Financing Statement
• Escrow Agreement for Entity Sale

20. Bill of Sale, Lease Assignment, and Other Documents for Transferring Your Business

• Bill of Sale: Asset Sale
• Bulk Sales Compliance
• Assignment of Lease: Asset Sale
• Assignment of Other Contracts: Asset Sale
• Assignment of Intellectual Property
• Approval of Entity's Sale of Assets
• Transferring Your Entity
• Assignments in an Entity Sale

21. Documents for Noncompete and Future Work Commitments

• Covenant Not to Compete
• Contract for Employment
• Contract for an Independent Contractor

Part 5

Closing the Deal

22. Preparing for a Smooth Closing

• Where and When to Hold the Closing and Who Should Attend
• Documents for Transferring Assets
• Documents for Transferring an Entity
• Handling Last-Minute Problems
• Moving On

Appendixes

A. How to Use the CD-ROM

• Installing the Form Files Onto Your Computer
• Using the Word Processing Files to Create Documents
• Using Government Forms
• List of Forms on the CD-ROM

B. Sample Sales Agreements

• Sample #1 Asset Sale of a Restaurant by One Sole Proprietor to Another
• Sample #2 Entity Sale of a Bookstore by the Two Shareholders to an Individual
• Sample #3 Asset Sale of a Landscaping Business by a Single-Owner LLC to a Partnership

Index