Many New Hampshire business owners have questions about selling their business. Here are five tips to assist a business owner to familiarize themselves with the process:
Working with a buyer who will not be able to complete a transaction is a huge waste of time (and money). All interested buyers should sign a confidentiality agreement before sending out anything other than a very basic profile of your business. In addition, you should require buyers to submit some basic financial information including how much they have available to invest in a business and what is the source of their capital to invest.
Many sellers will provide a selling memorandum at an initial meeting. After a qualified buyer is located an offer should be presented. This can take the form of a nonbinding letter of intent or a term sheet. Either way a writing, at a minimum, should spell out the terms of a deal so that all parties can move forward in good faith. Negotiating a deal includes outlining terms being offered by the seller, if any, conditions to be met prior to closing, due diligence items to be reviewed by the buyer, the timeframe to close the deal, post-closing conditions such as training or consulting to be performed by seller and non-compete matters.
Once a buyer makes an offer that is accepted by the seller the “due diligence” period begins. This is when the buyer will verify the representations made by the seller about items concerning the financial condition of the company, contracts with key suppliers, customer database, inspect equipment and other assets to be included in the sale and many other business specific matters.
Legal contracts that are typically part of a business sale include a Purchase and Sales Agreement, Bill of Sale, Lease Assignment and Release, Non-compete Agreement, a Promissory Note and Security Agreement.
The costs will vary depending upon the size and complexity of the business. Some typical expenses in connection with the sale of a business will be CPA or accounting fees – typically billed hourly. The CPA will generally preparation financial statements and provide tax advice and an analysis of potential tax liabilities.
Legal fees. Utilizing an attorney that concentrates in doing transactions to help review or draft the legal contracts and other closing documents is important. Costs may range from around $2,000 and up for a small transaction to as much as $10,000 or more for a multi-million dollar transaction.
At Welts, White & Fontaine, P.C. our lawyers have experience representing buyers or sellers of closely held businesses. We can help you develop strategies for a successful navigation of New Hampshire’s business transaction landscape. Please contact Attorney John Polgrean if you have questions or concerns about your business planning endeavors. (603) 883-0797. [email protected]
Author: John Polgrean
This blog is intended for informational use only. The information contained herein should not be construed as offering legal advice or a legal opinion.
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