sell your business, the step-by-step legal guide (2004)

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sell your business, the step-by-step legal guide (2004)

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[...]... that there will be no slip-ups or delays when the time comes to turn over the business to the buyer 5 Closing the Deal 3 Preparing a Sales Agreement Parts 3 and 4 are the heart of the book They show how to tailor your own sales agreement and the other legal documents that you’ll need to transfer your business to its new owner These are not cookie-cutter documents They must be fine-tuned to fit the needs... needs of you and the buyer—and these chapters show you how Part 3 (Chapter 12-18) focuses on the sales agreement the crucial document that you prepare and sign after you and the buyer agree on the price, terms, and legal structure of the sale The sales agreement ties together all the sale terms Whoever prepares the first draft—you, the buyer, or a lawyer—you need to understand the legal consequences... where you keep the lighting store and the other owners keep the contracting business Then, you’ll be free to apply your ideas to build the profitability of the store, with the idea of selling it within the next two years This would neatly sidestep the unsavory prospect of trying to sell a business over the objections of reluctant co-owners Or suppose you and the wife of your recently divorced co-owner (who,... delay the sale Instead, consider pulling your restaurant off the market and eking out a small profit for a few years until the technology sector revives and your bistro again has a line out the door E If You Need to Leave the Business, But the Time Isn’t Right to Sell In some situations, you may realize that your wish to sell your business quickly and move on with your life is in conflict with your. .. of legal forms and a CD-ROM so that you can tailor the sales agreement and other legal documents to fit your particular sale Here’s a brief overview 1 Overview of the Process The first six chapters explain the entire sale process, so you’ll know what to expect You’ll learn how to: • decide whether or not to sell • time your sale • prepare for the practical and legal steps involved in successfully selling... either reposition your business or move to sell it as quickly as possible 5 The Health of Your Business If your business is solidly profitable and likely to be more so in the future, chances are it will be reasonably easy to sell whenever you decide to make the move And this is especially likely to be true if yours is in a growing field in which small enterprises are 1/ 1 0 SELL YOUR BUSINESS: THE STEP-BY-STEP. .. Are Many Legal Routes to Staying Involved 1/11 G Protecting Your Future Ability to Earn a Living 1/11 1/ 2 SELL YOUR BUSINESS: THE STEP-BY-STEP LEGAL GUIDE If you’ve already decided to sell your business, you’re probably anxious to get on with the job That’s fine Skim or skip this chapter and move on to Chapter 2 L ike many other entrepreneurs, you may be ambivalent about giving up your business...3 The Key Legal Issues in Selling Your Business A Take Presale Legal Protections 3/2 B Understand the Differences Between Selling the Business Entity or Just Its Assets 3/3 C Be Clear on What You’ll Sell and What You’ll Keep 3/4 D Understand the Transfer of Intellectual Property 3/5 E Build in Legal Protections If the Buyer Stops Paying 3/6 F Assure Your Ability... 2 SELL YOUR BUSINESS: THE STEP-BY-STEP LEGAL GUIDE T hrough hard work, ingenuity, and possibly a bit of good luck, you’ve built a viable business Now, you’re ready to sell or at least you’re thinking about it But the process may seem intimidating, and you probably have lots of legal and financial questions Whether you want to handle the whole sale yourself or work with lawyers, accountants, and other... For example, frozen yogurt, video rental, pet 1/ 6 SELL YOUR BUSINESS: THE STEP-BY-STEP LEGAL GUIDE food, and nail care shops all have had their moment as the latest, greatest thing But today, if the hot action in your area is in coffee houses or gourmet sandwich shops, it may be hard to sell a frozen yogurt business, even one that makes a small profit The point is that when a once trendy business goes . law, and the author of Nolo’s Legal Guide for Starting & Running a Small Business, The Employer’s Legal Handbook, and How to Get Your Business on the Web. His monthly column, The Legal Advisor,. and Other Important Sales Documents I/3 5. Closing the Deal I/3 C. Working Efficiently with Lawyers, Accountants, and Other Professionals I/3 I/2 SELL YOUR BUSINESS: THE STEP-BY-STEP LEGAL GUIDE T hrough. involved in successfully selling your business • analyze the tax consequences of selling your business USING THIS BOOK TO SELL YOUR BUSINESS I/3 • set a realistic price range for your business, and •

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  • Intro. Using This Book to Sell Your Business

    • A. Is This Book For You?

    • B. How This Book Can Help

    • C. Working Efficiently with Lawyers, Accountants, and Other Professionals

  • 1. Deciding Whether—And When—To Sell

    • A. Deciding Whether or Not to Sell Can Be Agonizing

    • B. Do You Have a Saleable Business?

    • C. Working Out Problems With Your Co-Owners

    • D. Choosing the Best Time to Sell

    • E. If You Need to Leave the Business, But the Time Isn’t Right to Sell

    • F. Staying Involved With Your Business

    • G. Protecting Your Future Ability to Earn a Living

  • 2. The Key Steps in Selling Your Business

    • A. Figuring Out What Your Business Is Worth

    • B. Preparing Your Business for Sale

    • C. Creating a Plan for the Future

    • D. Marketing Your Business

    • E. Negotiating the Deal: Key Sale Issues

    • F. Signing a Sales Agreement

    • G. Closing Your Sale

  • 3. The Key Legal Issues in Selling Your Business

    • A. Take Presale Legal Protections

    • B. Understand the Differences Between Selling the Business Entity or Just Its Assets

    • C. Be Clear on What You’ll Sell and What You’ll Keep

    • D. Understand the Transfer of Intellectual Property

    • E. Build in Legal Protections If the Buyer Stops Paying

    • F. Assure Your Ability to Earn a Living Later: Guidelines for Noncompete Agreements

    • G. Limit Your Legal Liabilities to Third Parties Once the Business Changes Hands

    • H. Protect Yourself Against Unintended Liability to the Buyer

    • I. Comply with State and Local Laws That May Affect Your Sale

  • 4. Tax Considerations When Selling Your Business

    • A. An Overview of Key Tax Issues

    • B. Understanding the Federal Tax Rate That Applies to Your Sale

    • C. Tax Issues When Selling the Business Entity

    • D. Selling the Assets of a Business

    • E. Asset Sale by a C Corporation

    • F. Asset Sale by an S Corporation

    • G. Asset Sale by a Sole Proprietorship or Single-Member LLC

    • H. Asset Sale by a Partnership or Multimember LLC

    • I. Allocation of the Purchase Price

  • 5. Putting a Price on Your Business

    • A. There’s No Universal Pricing Formula: Many Factors Affect Price

    • B. Sales of Comparable Businesses

    • C. The Income Valuation Approach

    • D. The Asset-Based Approach

    • E. Industry Formulas and Rules of Thumb

    • F. How Appraisers and Other Experts Can Help You Set the Price

    • G. Putting It All Together to Price Your Business

  • 6. Working with Lawyers, Accountants, and Brokers

    • A. Lawyers

    • B. Accountants

    • C. Business Brokers

  • 7. Preparing Your Business for Sale

    • A. Make Your Business Attractive to Buyers

    • B. Get Your Paperwork in Order

    • C. Show How Profitable Your Business Really Is: Restate Your Profit and Loss Statement

    • D. Take Steps to Improve Business Profitability

    • E. Add Value to Your Lease

    • F. Communicate with Employees about the Sale

    • G. Clean Up Existing Problems

    • H. Nail Down Vital Relationships with Customers and Suppliers

    • I. Prepare a Checklist of Presale Tasks

  • 8. Finding the Right Buyer

    • A. First, Look for Buyers Close to Home

    • B. Strategic Buyers

    • C. Special Concerns When Approaching Competitors

    • D. Marketing Your Business by Word of Mouth

    • E. Marketing Your Business Through Advertising

    • F. How Business Brokers Can Help Find Buyers

    • G. How to Quickly Size Up Prospects

  • 9. Structuring the Sale

    • A. Asset Sale vs. Entity Sale

    • B. Lump Sum Payment vs. Installments

    • C. How to Structure an Installment Sale

    • D. Ten Strategies to Protect Yourself in an Installment Sale

    • E. Doing Future Work for the Business

    • F. Restrictions on What You Do Next: Noncompete Agreements

    • G. The Future of Key Employees

    • H. Keeping the Buyer Motivated

  • 10. The Investigation Stage: How Sellers and Buyers Check Each Other Out

    • A. The Buyer’s Investigation of Your Business

    • B. Honesty Is the Best Policy: The Importance of Full Disclosure

    • C. Business Information the Buyer Will Want to See

    • D. Protecting Sensitive Information with a Confidentiality Agreement

    • E. Why and How You Should Check Out the Buyer

    • F. Practical Steps for Evaluating a Buyer

  • 11. Drafting a Letter of Intent

    • A. Why Use a Letter of Intent?

    • B. What to Put In Your Letter of Intent

    • C. Why You Should Only Sign a Non-Binding Letter of Inten

    • D. Format for a Letter of Intent

  • 12. Preparing the Sales Agreement and Other Legal Documents

    • A. Overview of Your Sales Agreement

    • B. Related Legal Documents

    • C. Well-Drafted Documents Are Crucial

    • D. Preparing Your Sales Agreement and Related Legal Documents

    • E. How to Prepare Attachments to Your Sales Agreement

    • F. Steps in Finalizing Your Sales Agreement and Other Documents

    • G. Amending Your Sales Agreement

  • 13. Who’s Selling, Who’s Buying—And What’s Being Sold

    • Table of Contents

    • A. Naming the Parties

    • B. Identifying Your Business and What You’re Selling in an Asset Sale

    • C. Identifying What You’re Selling in an Entity Sale

  • 14. The Sale Price and Terms of Payment

    • A. Sale Price: Asset Sale

    • B. Inventory: Asset Sale

    • C. Dealing With the Purchase of Accounts Receivable: Asset Sale

    • D. Sale Price: Entity Sale

    • E. Deposit

    • F. Payment at Closing

    • G. Promissory Note

    • H. Security for Future Payment—Asset Sale

    • I. Security for Future Payment—Entity Sale

  • 15. Dealing with Liabilities and Representations

    • A. Liabilities in an Asset Sale

    • B. Liabilities in an Entity Sale

    • C. Representations—What They Are and Why They Matter

    • D. Seller’s Representations

    • E. Buyer’s Representations

  • 16. Payments for Noncompete and Consultant Deals

    • A. Agreeing Not to Compete With the Business After the Sale

    • B. Agreeing to Work for the Business After the Sale

  • 17. Other Important Legal Language for the Sales Agreement

    • A. Contingency Clause

    • B. Closing Arrangements

    • C. Dispute Resolution Clause

    • D. Technical Contract Clauses

    • E. Additional Optional Clauses

  • 18. Signatures on a Sales Agreement

    • A. Required Signatures for a Sole Proprietor on a Sales Agreement

    • B. Required Signatures for an Entity on a Sales Agreement

    • C. A Spouse’s Signature on the Sales Agreement

    • D. Signature Clause in a Sales Agreement

    • E. The Typical Formats for Signing a Sales Agreement

    • F. Accepting Personal Responsibility for Commitments in a Sales Agreement

    • G. Providing for Signatures of Spouses and Outside Guarantors

    • H. Signing the Sales Agreement

  • 19. Promissory Notes and Other Installment Payment Documents

    • A. The Promissory Note

    • B. The Security Agreement

    • C. The UCC Financing Statement

    • D. Escrow Agreement for Entity Sale

  • 20. Bill of Sale, Lease Assignment, an Other Documents for Transferring Your Business

    • A. Bill of Sale—Asset Sale

    • B. Bulk Sales Compliance

    • C. Assignment of Lease—Asset Sale

    • D. Assignment of Other Contracts—Asset Sale

    • E. Assignment of Intellectual Property

    • F. Approval of Entity’s Sale of Assets

    • G. Transferring Your Entity

    • H. Assignments in an Entity Sale

  • 21. Documents for Noncompete and Future Work Commitments

    • A. Covenant Not to Compete

    • B. Contract for Employment

    • C. Contract for an Independent Contractor

  • 22. Preparing for a Smooth Closing

    • A. Where and When to Hold the Closing and Who Should Attend

    • B. Documents for Transferring Assets

    • C. Documents for Transferring an Entity

    • D. Handling Last-Minute Problems

    • E. Moving On

  • Appendix A How to Use the CD-ROM

  • Appendix B Sample Purchase Agreements

    • Asset Sale of a Restaurant by One Sole Proprietor to Another

    • Entity Sale of a Bookstore by the Two Shareholders to an Individual

    • Asset Sale of a Landscaping Business by a Single-Owner LLC to a Partnership

  • Appendix C Legal Forms

    • IRS 8594, Asset Acquisition Statement and Instructions

    • Checklist of Presale Tasks

    • Potential Buyer Information

    • Confidentiality Letter

    • Attachment to the Sales Agreement

    • Amendment of Sales Agreement

    • Promissory Note

    • Security Agreement for Asset Sale

    • Security Agreement for Entity Sale

    • UCC Financial Statement and Addendum

    • Escrow Agreement for Stock Certificates

    • Escrow Agreement for LLC Transfer Certificates

    • Bill of Sale for Business Assets

    • Statement Regarding Absence of Creditors

    • Certificate of Acknowledgment of Notary Public

    • Assignment of Lease

    • Assignment of Contracts

    • Consent to Assignment of Contract

    • Assignment of Intellectual Property

    • Certificate of Acknowledgment of Notary Public

    • Consent to Sale of Assets by Corporate Board of Directors

    • Consent to Sale of Assets by Corporate Shareholders

    • Consent to Sale of Assets by LLC Members

    • Consent to Sale of Assets by Partners

    • Covenant Not to Compete

    • Independent Contractor Agreement

    • Closing Checklist for an Asset Sale

    • Closing Checklist for an Entity Sale

  • Index

  • Related Products

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