Selling your small business

You've put a lot of your life into your business -- worked long hours, postponed vacations, spent too much time away from your family -- but your sacrifices have paid off.  Your business is established and profitable.  It's not too soon to start thinking about the reins will be handed over when the time comes.

Nobody runs a business forever

Every business owner needs to think about what will happen to the company when he or she...

• Retires
• Decides it's time to move on
• Becomes disabled
• Dies

Even if you have discovered to secret to eternal life, it is likely that you wouldn't want to run your business until the end of time. Whether you expect that you will continue to own your business for another five or fifty years, if your vision includes its eventual sale, it's not too early to plan for it now, while you're at the helm. 

Legal considerations in selling a business

• Assessing your business's value  
• Pricing the business for sale
• Helping the buyer with financing
• Taxes you will pay on the sale, which depends on:
  
  • Your business structure
  • Whether you sell the assets, the entity, or both
• Negotiating the terms of sale
• Drafting the sales agreement
• Filing with the IRS
• Staying on as a co-owner or employee
• Confidentiality and non-compete agreements
• Keeping current employees
• Transferring contracts and agreements

What if you are a co-owner?

Owning a business with another person creates additional legal complications when one of the owners leaves.

If you are a co-owner and haven't yet spelled out the terms of your co-ownership in writing, do it now! One of you is going to leave eventually.  Failure to plan for that inevitability can damage a business, wound families, and destroy friendships.

When a co-owner leaves

Some of the additional issues the business will have to deal with when it loses one of its owners include:

• Dealing with a spouse or other family members of the departed owner
• Disputes regarding the valuation of the business
• Cash flow disruption while trying to make payments
• Struggles to replace the work done by the departed owner
• Potential litigation and/or forced liquidtion 

Preventing the legal problems that might arise with co-ownership

One way to prevent the inevitable departure of an owner is to make sure you have written agreements in place now.

• Buy-sell agreement
• Shareholder agreement
• Operating agreement, including transfer provisions