If you are selling your business, what are some legal steps you should take?

If you plan on selling your business, it is important to understand this process is more complicated than finding a buyer and reaching an agreement on a price. There are legal steps to take when selling your business that can protect you in the long term. By proceeding carefully now, you can avoid headaches that might come back to haunt you in the future.

Performing Due Diligence

Although due diligence is generally part of buying an asset, it is a good idea when selling your business as well. Before you enter into a sales agreement, you have the opportunity to identify potential issues and rectify them before the sale occurs.

Resolving these issues can do more than allow you to increase the sale price. They also reduce the risk of costly litigation in the future if an undiscovered issue becomes a problem for the new owner.

Valuation

One of the most important parts of selling your business is the process of valuation, which is an estimation of what your company is worth. You will need to take into account your assets, income, liabilities, and a host of other factors. There are three common approaches to valuation, which include:

• Asset-Based Approach. Valuing your business based on the value of the assets it owns.
• Income-Based Approach. Valuing your business based on estimates of future profit.
• Market-Based Approach. Valuing your business by comparing it to what competitors have sold for.

Valuation is about more than just finding your asking price. It also ties into tax obligations and estate planning questions. Due to the high stakes, it is a good idea to work with legal counsel during this stage.

Structuring the Sale

The way the sale is structured is another important consideration. There can be unexpected consequences like avoidable tax obligations, depending on the type of structure you choose. An attorney can help you review your options and take the right approach.

In some cases, an asset sale might be the right option. This usually involves a sale focused on the value of tangible and intangible assets. Alternatively, you could complete a stock sale to the new owner, allowing for a smooth transition. The right approach can be difficult to identify without help.

Talk to One Oak Legal Before Selling Your Business

If you are ready to retire or are interested in moving into a new direction with your career, it might be time to sell your business. This is a complicated process that is best handled with the help of experienced legal counsel.

At One Oak Legal, our business attorneys understand the excitement and apprehension that can come with such a big decision. Before you commit to anything, contact us to discuss how we might be able to help.