4 Legal and Logistical Considerations When Selling a Business

When you decide to sell a business, it can often be an exciting experience. You may be making the sale so you can move on to a new opportunity, or enjoy a different phase in your life. Most business owners also realize that selling a business can bring a certain amount of stress as well, but they’re still surprised when they realize just how challenging it can be to navigate this situation.

Rather than letting frustration or potential hurdles serve as obstacles to selling your business, it’s best to try instead to prepare adequately from the start. A big part of preparation is knowing what you’re facing, and below are four legal and logistical concerns to remember when you’re selling a business, as well as ways to avoid them.

Your Records

This is the area business owners are often most ill-prepared: the gathering and organization of their books and records. When you sell a company, the buyer is going to want to see everything including your contracts, your financial records and your customer and employee files. It’s a good idea to get all of this together before you even begin looking for a buyer so they can jump right into due diligence, which will speed the process up. Using a Virtual Data Room from a company like Firmex is a good way to get all of the files centralized in one location, and make them easily but securely sharable. It’s important to note that misrepresentation about your business and your financials can lead to future legal action if it’s discovered. Be honest and transparent, even when it can be tempting to exaggerate to ensure a buyer remains interested.

You’ll Likely Need Professionals

Unfortunately, a lot of business owners go into the process of selling with the idea that they don’t need outside guidance. They think they can go it on their own, but this generally leads to a very long and sometimes unsuccessful process. From a legal and logistical standpoint it’s important to hire a broker with experience in handling business transactions, and you likely also want to work with a lawyer. It may seem like an annoyance or an additional cost, but you’ll probably end up saving money as a result.

Non-disclosures

Before you start talking with potential buyers, even in an informal way, you need to have non-disclosure agreements in place. This ensures that all information you provide to a possible buyer will remain confidential for a period of time of time. Otherwise, you may end up sharing your secrets and information with someone who could become a competitor of your business. As well as a general non-disclosure, specific privacy and legal topics to keep in mind include copyrighted information, intellectual property and information on your employees.

Pre-Qualification

If you want to avoid wasting your time and also protect yourself against non-serious buyers, pre-qualification can be necessary. A lot of business sellers shy away from this, fearing it will cause potential buyers to lose interest, but if they’re serious, this shouldn’t be an issue. You don’t want your business information to go to the wrong person, so you want to protect yourself and your company by making sure only qualified potential buyers have access.

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