Top 3 Questions a Business Owner Should Ask Before Exiting

Small business owners who consider what the final chapter of their business's story will be are often happier. This is because the decision to sell, merge or close a business has a major impact on the owner's future. The process of either option takes time to complete and financial and legal expertise.

Based on our years assisting small business (SMB) owners' plans for their exit, founders who answer the following questions years before their time may put themselves in a better position to leave than others.

Top 3 questions to ask yourself

Clarity of purpose is as helpful at the end of an enterprise as it is at the start. Consider these points:

1. What do I want out of the transaction? The answer to this will shape many aspects of your exit strategy. For owners who want to leave a family legacy, there are several different options available, depending on factors like transitioning ownership to a successor during your lifetime or receiving future income from the business.
2. When is the right time to exit? The timing cannot be controlled, but planning for an exit may increase the likelihood of an advantageous transition. Plan for the unexpected — such as the death of a partner, economic downturn or a buyout — to keep your assets and interests safe.
3. What advice do I need? An SMB owner needs financial advice and legal counsel to ensure compliance with federal and state regulators and safeguard against costly litigation or financial loss. 

There is a good chance you will sell your business to shareholders, your children or another company in a merger and acquisition deal. Take a look at some of the legal issues sellers might face.

Legal considerations to selling a business

Undoubtedly, there will be contracts to oblige and draw up in this transfer of assets. During a sale, owners must fulfill legal and fiduciary obligations to employees, shareholders, vendors and customers. Also, legal documents that protect the confidentiality of the offer (nondisclosure agreement) and the all-important letter of intent must be drawn up. The LOI puts in writing an agreement to buy the company, at a specified price and under certain terms, which protects the seller. 

Other legal issues that might become deal-breakers include withholding information such as potential human resource issues or supplier difficulties could be discovered during due diligence. At any point during the sale process a potential purchaser could walk away, tarnishing your offer. Leaving your business can be stressful enough. Why make it more legally challenging?

Advice from an experienced Arizona business attorney on your legal obligations can make a business exit more successful and profitable. Contact our mergers and acquisitions experts at the Law Offices of Donald W. Hudspeth, P.C. and schedule a no-obligation consultation.

Categorised in: Starting a Business in Arizona

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