5 Legal Steps to Selling Your Business

Step 1. Determining the value/worth of the business

There are two approaches that will help you determine the value/worth of the business.  The first approach is to determine the value through the business assets. By assets we mean what does the business own? Is it computers, desks, phones, etc.  The second approach is to determine the value through the stream of cash it makes each year minus other accounting factors/reports

 

Step 2.  Cleaning up business financials

It is important that you make sure that all money and accounts are up to date. Meaning making sure all debts, lawsuits, insurance are all paid up. Looking up exact structures of the business and any other property owned books are key components of making sure that your business financials are in order.

 

Step 3. Equity vs. Asset

 The terms equity and asset are two important terms you need to know. Equity is the difference between the value of what your business is worth minus what you owe on it. Simply put, equity is how much is actually yours. Assets are resources with economic value that an individual or corporation owns or controls. Equity and assets are included in one equation. Equity equals the difference of assets and liabilities (debt owed by a company).

 

Step 4. Preparing the documents for the sell of the business

In order to sell the business you need several documents. Key documents that will help you sell your business include but not limited to financial documents such as balance sheet, tax returns, lease or deed, insurance policies, any agreements with third parties. All of these documents may help increase the value of your business, identify a selling strategy, and help with determining a fair asking price.

 

Step 5. Legal issues to consider

When selling a business, issues can occur without warning. The main legal issues in the matter of selling a business are outstanding debts, unpaid taxes or wages, transferring the business, maintaining all or previous business connections or contracts, dealing with sensitive information pertaining to employees, copyrighted information, and trade secrets.

 

As you can see purchasing or selling any business can be just as complicated as starting one. With the correct team to walk you through the process and with the right expectations this can be a very rewarding and satisfying process for you and the buyer.