Selling Your Business
By Lane V. Erickson, Idaho Business Attorney
As the premier Idaho business law firm, the team of attorneys at Racine law office work with each individual client to help create, structure, and operate their business in a way that helps each client succeed. Our goal is to help our clients understand the options that are available to them in order to be successful. This is never more true than when it comes to selling your business.
The attorneys on our Idaho business law team include partners Lane Erickson and TJ Budge, and attorneys Nate Palmer and Dave Bagley. Each of the attorneys on our team is skilled, knowledgeable, and experience in assisting clients with their business needs including selling their business.
In previous articles we talked about how an individual can sell their personal ownership interest in a business when the remaining owners want to continue operating the business. Additionally, we talked about how a business owner can go about selling the assets in their business while not selling the actual business itself. The purpose of this article is to be more specific about how an individual can sell their entire business.
This article is not designed to be exhaustive. Rather, this article is designed to give you a starting place in knowing what you need to be thinking about if you are considering selling your business to another person or group of people. In order to help you, we will describe exactly what the transaction is when you are selling your business. Then we will discuss the documents that are involved in this transaction. Finally we will talk about the corporate documents that should be kept and made available during this transaction. Because this article is not exhaustive, if you are considering selling your business, we encourage you to contact us so that we can answer your specific questions and talk with you about the transaction.What the Transaction Really is?
Unlike the previous articles where we discussed selling either an ownership interest in a business, or selling the assets in a business, if you are selling the entire business, you are selling everything that you own and that is involved in the business itself. In other words, it’s often known as a turnkey transaction where you simply receive the payment from the buyer, turn the keys over to the buyer, and the buyer steps into your shoes and continues to operate the business.
The reason this is stated so plainly is that it is vitally important that both the buyer and the seller understand and agree to what the transaction really is. As mentioned in previous articles, there have been many business transactions where the parties have not clearly understood what the transaction was that was contemplated by the other party. As a result, when it came time to go to closing, once the misunderstanding was discovered, it put either a halt to or slowed down the transaction.
So, the very first step in selling your business is to make sure the buyer understands exactly what they are buying and to make sure that this understanding matches what you believe you are selling. Once there is a clear understanding between both the buyer and the seller, then the parties can move forward in dealing with the documents that are involved in the transaction.What Documents are Involved?
The documents that are involved in a transaction of selling a business are usually a little more inclusive than the documents involved in just selling either the assets or an ownership interest alone. More than likely these documents will include a purchase and sell agreement, a bill of sale, various deeds for any real estate that may exist, a list of the inventory, machinery, and/or equipment, as well as all relevant financial documents.
The financial documents would likely include all bank account records, all financial records, all accounts receivable records, all accounts payable records, and any other financial documents necessary for the ongoing operations of the business. It’s also possible that financial documents could include balance sheets, financing statements, profit and loss statements, and any other documents that may have been provided to financial institutions in order to obtain loans. These financial documents would also include any specific obligations that are owed to any creditor such as loans to banks, mortgages, liens, promissory notes, or outstanding invoices or account statements. Essentially, you are opening and making available all the records to the buyer.Corporate Records
Finally, there are numerous corporate records that must also be provided to the buyer. This would include the organizational records for the business entity that you own. For an LLC this would include a certificate of organization, an operating agreement, and any annual reports that have been filed on behalf of the LLC. These would also include all tax documents for both state and federal tax filings. Additionally, you would be providing copies of all employment records, as well as any other assets owned by the corporation that are necessary for its operation including insurance information and so forth. Finally, you would also include any specific business licenses or permits.
Again, the purpose of this article is not to be exhausted in the list of things that need to be accomplished, and records and documents that need to be provided from you to the buyer. Rather, the purpose of this article is just to give you an overview of what is involved in the transaction. If you are considering selling your business, you should consult with a qualified Idaho business law attorney so that you can work through the important details necessary to complete the transaction. We have helped numerous business clients sell their business to other buyers, and we are confident that we can help you too!Enlist an Idaho Business Attorney to Help You
Our team of Idaho business lawyers can help you with any of your business structure or operation needs. Whether you are seeking to create a new business or review a current business, we are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877.232.6101 or 208.232.6101 for a free consultation. You can also email us directly at firstname.lastname@example.org or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho business problems.