Business Law

Preparing to Sell Your Business

Selling your privately owned business is not a task to tackle on your own. It can be difficult to set the right sales price, find a buyer, and structure a deal that gets you out of the business without lingering responsibility for any past actions. Even if your business is small in size, help from experts, such as lawyers, accountants, and brokers, can protect your interests.

Prepare for Sale

A potential buyer expects to review all aspects of your business operations before making a deal. This process is called due diligence. It is a legal requirement that protects the buyer in case the buyer has to sue in court concerning some aspect of the deal. If you are not prepared to show some information that the buyer wants to see, your reluctance might scare the buyer away. It is particularly important to have the company's books in order.

Expert Valuation

Setting a sales price for your private business is harder than it seems. Private businesses lack an established market for ownership interests, so it is often impossible to know what your business is really worth until you get the first offer. Business valuation experts use economic models that take into account revenue, current earnings, future earnings, and current assets to help establish what your business should be worth. Ultimately, your business is worth only what someone is willing to pay. But a business valuation expert can help you set an initial asking price.

Sell Just the Assets

There are two ways to sell a business - through an asset purchase or an ownership purchase. In an asset purchase, the buyer purchases all or some of your business assets. You remain responsible for the shell of the business entity and any future liabilities. The buyer gets to pick certain parts of the business. In an ownership purchase, the buyer steps into your shoes, purchasing all of your ownership interest in the company and assuming all responsibilities.

Put Agreements in Writing

The terms of the sale of your business should be placed in a written sales agreement. A written agreement helps you avoid misunderstandings about what is included in the sale and about the information you provided on the status of the business. It can also prevent the buyer from backing out of the deal at the last minute.

A Business Lawyer Can Help

The law surrounding sale of a business is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a business lawyer.

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