Five Deal Closing Tips for Your Business Sale
Deal closing is one of the most important days in the life of your business sale. You created a good listing, prepared well, navigated the due diligence process, and have agreed to deal terms. But now you must make the business sale official.
After all the hard work that has gone into selling your business, don’t trip up at the finish line. Stay focused on the details to ensure you successfully transfer the business to the buyer. Here are five tips to help you through the deal closing for your business sale.
The Deal Closing Roster
As with any step of the business sale process, you may want to consider seeking professional advice. A qualified attorney can help prepare the necessary documents and ensure a smooth deal closing. Additionally, an escrow agent can provide assurances to both parties that all obligations are met before payment is made. While it may not be required in all parts of the country, having this advice can help make sure that everything was handled appropriately and provide peace of mind.
At the deal closing itself, both the buyer and the seller will generally need to be present, typically with any appropriate advisors. Depending on the complexity of your transaction, and the number of documents required, you may want to conduct the deal closing at either the escrow agent or attorney’s office.
Often, both parties will need to sign every document, and sometimes even every page. Additionally, a notary may be appropriate, who will require valid photo IDs from each signatory. For less complex transactions with fewer documents to sign, electronic signatures through a trusted service provider may be sufficient.
Deal Closing Check List
Each deal is different and can involve a wide range of documents. These could include one or more of the following:
- Business Purchase Agreement – The primary document that outlines the key terms and conditions for the business sale
- Asset and Liability lists – Outlining the assets and liabilities including in the sale and their respective values. Asset sales often require allocation of purchase price across assets for tax purposes
- Transfer of Lease and Other Agreements – Assigning the lease and any other applicable obligations to the new owner
- Transfer of Intellectual Property – To affect the transfer of patents, trademarks, copyrights and other intellectual property
- Financing Documents – Outlining terms of any financing agreements
- Notification of Sale to Creditors – Many states require creditors to be notified in the event of a sale
- State and Government Filing Requirements – May include documents to transfer business licenses, affirm all sales and use taxes have been paid, or required tax forms such as IRS Form 8594
- Business Organization Documents – Business charter or partnership agreement may require formal approval for the sale
Every state has different requirements, and, again, every business is different. Therefore, it is important to make sure that you prepare and record or file all the appropriate documents to legally transfer the business. An attorney or tax advisor familiar with the legal requirements of your state can help ensure you don’t miss anything.
Review and Sign the Business Purchase Agreement
The Business Purchase Agreement is often the most critical document prepared for the deal closing. It generally serves as the legally binding contract between the buyer and seller that outlines the key terms and obligations of each party. This agreement also typically serves as the foundation for the escrow contract. Formalizing the terms of the business sale in this agreement allows both parties to prevent any misunderstandings.
Terms of the agreement can vary based on the complexity of the business and transaction. However, a Business Purchase Agreement will typically contain these key elements:
- Business description
- Parties to the transaction
- Closing date
- Purchase price and escrow terms
- Assets and liabilities included
- Representations and warranties
- Confidentiality between the parties
- Non-compete and non-solicitation provisions
- Post-closing transition assistance
You may run into problems down the road if you do not formally agree to these terms. Completing this document in detail, with the assistance of an advisor if needed, is critical to properly transferring the business. The last thing a buyer or seller wants is a legal dispute over the deal closing.
After the Business Sale
You signed the papers, and the deal is now official. Depending on what is involved in your deal closing, you may not receive a check on closing day. It may take a few days or weeks for the buyer or their attorney to confirm all the title and contract transfers have taken place. Also, you may need to pay some expenses at the time of closing. Fees to any brokers, attorneys, or other advisors may be due on closing day.
The transition period after the deal closing can vary significantly in both time and involvement with the business. In some deals, sellers agree to help the buyer transition over a short period with training. In other cases, sellers may even stay on as employees of the business for a longer period. Whatever your specific situation, discuss details of the transition ahead of time.
Celebrate Your Success
Selling a business can be a long, emotional road. So, when you close your business sale, take time to celebrate your accomplishment with your team, family, and friends. You may start to experience doubt or anxiety about life after your business. But remember, a business sale can also be the start of a new adventure! Whether that is traveling, spending time with family, or looking to buy a new business on Firm Exchange, enjoy the fruits of your labor and celebrate your success.
DISCLAIMER: The information contained in this article is for informational and discussion purposes only, and should not be relied upon without seeking your own professional advice. The Firm Exchange, LLC is not a law firm, accounting firm or professional services firm, and accordingly it disclaims any liability for any reliance on the contents of this article. As each situation is unique, you are encouraged to discuss your specific situation with a qualified attorney, accountant and/or other relevant professional services provider.