If you are the sole owner of an unincorporated small business and you want to sell your company, there are a few things you need to take into consideration first. While some of these tips will seem obvious, not following them could cause costly legal hiccups down the line
Consider hiring a business broker
If you’re ready to sell your business, but you don’t know what to do next, consider hiring a business broker. Employing a competent and experienced intermediary can make the process of selling a business much easier. Not only can they help you estimate the value of your business, they can create a thorough information memorandum, and they can help you find potential buyers. Once a suitable purchaser is found, they can help you negotiate the terms of sale and perform all necessary due diligence. This site will help you find a qualified business broker.
Get your paperwork in order
If you own an unincorporated small business, you likely filed your annual profits and losses with the Internal Revenue Service via the Schedule C portion of a 1040 Form. That’s not a problem, but reviewing the seller’s previous tax records is a standard part of a purchaser’s due diligence. You’ll need to provide your buyer with copies of your tax returns before closing. The same year the sale goes through, you’ll also need to include an 8594 Form, an Asset Acquisition Statement, with that year’s tax filings.
Reclaim your possessions
If you’re like most burgeoning entrepreneurs, you probably brought some things you own personally into the office, say a coffee pot, a laptop computer or the first dollar you ever made. You’ll want to make sure you reclaim those before you draft a Sales Agreement. As this Blog for Business Law post makes clear, you don’t want to be in a situation where you end up accidentally giving away a prized possession.
Draft a sales agreement
As this post on the Small Business Administration’s website explains, you’re obligated to create a Sales Agreement before you sell your business. This document should include a full listing of all your company’s assets, the purchase price and the date of closing, along with other key information. The SBA has a sample Sale of Business Agreement form on their site. It’s highly recommended that you consult with a business lawyer before drafting a Sales Agreement to make sure it includes all possible forms of indemnity. You don’t want any loopholes to turn your profitable deal into a money pit.
This article was written by Mario McKellop for Small Business Pulse