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Task list for when you sell your business

November 15, 2018

Steps involved when selling your business. Buyers can also use this list as a time line and road map of the steps that are expected to occur and what is expected of them.

  • Be sure you want to sell
  • Be doubly sure you want to sell
  • Have your spouse or partner on board with what you will be doing
  • The seller needs to be made aware that they will have to provide information about their business and won’t be able to hold back anything
  • Engage a transactions based attorney
  • Notify your accountant and bring him or her on board as soon as you start the process
  • Prepare a transaction information sheet with some basic information about the business
  • Talk to buyer and determine interest level and if you think they are serious
  • Have buyer provide some sort of assurance they have funding available
  • Have your attorney prepare a confidentially or nondisclosure agreement letter for the prospective buyer to sign before you give them anything
  • Note: It has been our experience that keeping these negotiations confidential is very difficult at best, so be prepared to deal with questions from interested parties that tell you what they heard and ask for verification, or reassurance
  • Possibly engage an M&A advisor, investment banker, or business broker to either advise you or find a buyer or buyers
  • Have a valuation specialist determine the value and help you decide on the asking price and what you should settle for and the amount you should not go below, and the terms
  • In many transactions the terms can be more important than the actual transaction price, so pay attention to what you will be getting, and when
  • Your accountant should model out the tax methods and consequences of the sale
  • Engage your accountant to project what you would net after all costs and taxes from the sale and the possible cash flow you would end up with afterwards
  • Have the buyer give you a letter of interest laying out suggested terms – this is the start of the negotiation progress
  • Once the letter of interest is received you should start assembling the information the buyer would need to have the due diligence performed. Usually the buyer will give you a listing of what they would like, initially. Note that we have such a list that we usually give to our clients when the process starts
  • When a deal is agreed to have the buyer present you with a thorough letter of intent (“LOI”). This is the start of serious negotiations and should be handled with the upmost focus and interest
  • Your attorney would review the legalities with you and if necessary will suggest changes
  • Once the LOI is signed your attorney should start preparing the contract of sale.
  • While this is being done, issues will be raised that haven’t been previously discussed. These include the need for the buyer to review employment contracts, independent contractor and consulting arrangements, tax compliance filings, leases, licenses, trademarks and patents, vendor or customer contracts, warranties, regulatory issues and myriad other items that you likely haven’t thought about in years, if as all
  • You will need to discuss with the buyer whether any employees will be let go and the timing and who will be responsible for severance payments
  • The contract drafting will cause a new round of negotiations – not as serious as the previous negotiations, but the price could be affected by the results of this. Included in this will be the amount held in escrow and how payments would be released and then paid out
  • Other prospective buyers will need to be told that you are selling to someone else
  • You have to decide which of your personnel, if any, you will inform about what is going on, or if you will keep it secret from everyone
  • If there is an earn out or deferred payments or some ownership that is retained, that will be covered more thoroughly in the contract, and this is usually negotiated as part of the purchase price
  • If there are to be deferred payments, decide on the type of security or collateral
  • If there are deferred payments you should consult with an insurance agent to determine if a life insurance policy on the buyer is necessary and if it can be obtained. You will also need to know how those payments will be taxed
  • The interest rate on deferred payments will also need to be determined. If no interest is provided for, there would be imputed interest for tax purposes – make sure you understand how this would work
  • The buyer will commence the due diligence process. You will need a “team” to assist you with this
  • Some more negotiations and contract amendments
  • The contract could be signed before the due diligence starts, during the due diligence process or at the closing. This depends on the thoroughness of the letter of intent and timing of the sale
  • When the closing takes place, you will get your money, usually a certified check, attorney’s escrow check or a wire to your bank, and any notes for deferred payment
  • Pay all your professionals and those assisting you on your team
  • There likely will be some post-closing adjustments that will need to be negotiated.
  • Usually the contract would call for indemnification of undisclosed liabilities in excess of an aggregate amount – watch for this
  • If you sold the assets of the business, rather than the corporate stock or ownership interests, you will need to wind down and eventually liquidate that entity. This can take a few months or a few years depending on the circumstances. You will need your accountant and attorney to review this with you
  • If you sold the assets of an S corporation or another pass through entity, and had outside basis, you might need to liquidate that entity in the same year as the sale to be able to offset any gains with that basis. This is a very complicated tax move and you must be advised about this before the transaction is consummated
  • Don’t plan your vacation right away – you will need to hang around a while to assist in the transition to the new owners
  • Plan a nice long vacation about three months after the closing, and let the buyer know well in advance of your lack of availability during that vacation

Some deal point that come up that aren’t usually negotiated initially

  • Guaranteed net worth of the entity that is the buyer
  • Financial statements usually need to be on GAAP, but many companies use a modified GAAP or the income tax basis. It needs to be made clear what method the reports presented are on and that they should be acceptable as such, without GAAP adjustments
  • Software licenses for every computer

This is a pretty good list, but every deal is different and brings forth new sets of issues, things to do or what to provide to the buyer. Lou Young, director of client services and a valuation specialist and consultant, assisted in this blog and he can be reached at As always, contact me with any questions at

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