Selling a business: What you should knowJune 15, 2016 4:08 pm Leave your thoughts
After starting their business, many entrepreneurs may be faced with the prospect of selling it off. Whether this is spurred by a struggle to both own and operate the business in question or simply a move to leverage the company's value and retire, there are no right or wrong reasons to consider selling. However, if you are interested in transferring ownership of a business you started, here is a few facts you should know:
"There are no right or wrong reasons to consider selling."
You don't have to sell it off entirely
If you are feeling torn about completely offloading the product of your hard work, you can opt to sell a portion of the ownership. This essentially means turning a sole proprietorship into a partnership. From there, you can draft a partnership agreement than spells out how much of the business you are selling and what roles and responsibilities are assigned to the various partners.
Keep in mind, as Forbes' Holly Magister says, that investors looking to purchase a business are often looking for a company where there entrepreneur is not an active participant in the day-to-day operations. An owner who wants to remain involved in the business should be prepared to have field bids potentially lower than the company is evaluated at. One solution is to be a non-controlling interest or silent partner in the business.
Buyers may come from within
Many entrepreneurs may find that the best person to take over their enterprise was under their nose all along. A long-time employee may be the perfect candidate to assume ownership given their familiarity with operations and the overall ethic of the business.
Clear your books and settle up
If you are downing in business debt, selling off the company may seem like an attractive option to get out from under it all. But this associated debt can make a sale less likely – or worse, derail a sale during the negotiations or closing stage. Focus on at least consolidating debts and clearing your books as best you can before you start soliciting buyers, and make sure to be totally transparent about any business debts or obligations. Not disclosing debts incurred buy the business can leave you vulnerable to a lawsuit.
Some things are included in the sale, while others aren't
Selling a business is sure to include certain assets – including logos, secret recipes, inventory, possibly a physical location. Other assets – like any patents, copyrights or inventions you used as part of daily operations – may be retained by the rights holder even if the business is sold, resulting in a need to draft a licensing agreement following the completion of the sale. Even if you sell off the company entirely, you may still be owed ongoing profits related to the use of patents or copyright.
To learn more about how to sell or purchase a business, contact The Law Offices of Donald W. Hudspeth, P.C., today.
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