In part one of this two-part series, we discussed important things to remember when buying or selling a business in Texas. Here, in part two, we will discuss some important things to remember when selling a business. You will note some common elements between buying and selling, but depending on which side of the table you are on, the process and legal guidelines will vary.
Part Two: Selling a Business in Texas
When selling a business, there is more involved than just deciding to sell and setting a price. Businesses are more complicated, and there is more involved in the process of prepping your business for sale, and ensuring your sale goes smoothly.
Here are some important things to remember when selling a business in Texas:
Asset or entity sale
The first step in selling a business is deciding whether to sell it as an asset or entity sale. An asset sale means you are only selling the assets of the business. An entity sale means you are selling the assets and liabilities of the business as a whole.
The next thing you need to do is get a broker, appraiser, or accountant to determine the value of your business. Understanding the value of the business is an important part of the selling process, and factors into many other steps along the way.
Organize company documents
As a business owner, you likely have built relationships with vendors, distributors, customers, and other parties. Before selling, it is important to gather and organize all documents related to your business, and your relationships.
This document provides potential buyers with a comprehensive overview of the business – it’s health, value, operations, products and services, etc. The selling memorandum should be available to any serious buyer who signs a confidentiality agreement.
Terms of purchase
Brokers and potential buyers will often want to negotiate terms of purchase like the price, interest, warranties, or lease terms. You need to be prepared to negotiate and be able to support any counter-offers you make with documentation.
Serious buyers may present you a letter of intent, and will often want to have the business inspected (documents and physical). This is one part of the process where the valuation and organized company documents is vital.
The purchase agreement
Once you and a buyer have negotiated terms and are ready to seal the deal, you will need a purchase agreement. The purchase agreement should detail all terms of the transaction, including:
- Buyer and seller names
- Purchase price and form of payment
- Closing date
- Required actions to be completed prior to closing
- Warranties and representations of buyer and seller
- Confidentiality terms
- Legal provisions
Any additional information or documents required, such as promissory note, stock transfer certificate, company resolutions, bill of sale, etc.
Getting Help When Selling a Business
Selling a business can be a challenging process, but when managed properly, is rewarding. Get help prepping your business for sale, drafting documents, or ensuring that your purchase agreement is legal by contacting Daic Law today. Call us at 877-893-6040, or fill out our online form to learn more.