Selling a Business
Selling a portion of your business could be a good strategy if you’re trying to create liquid assets. Doing so gives you money to use as you see fit, while still allowing you control of your business. The following are four steps you can follow to get started in selling just a portion of your business.
- Letter of Intent
When you have someone who is interested in buying the portion of your business you are trying to sell, you will need to draft a letter of intent. This letter is nonbinding, but generally states you will not put out advertisements for the business while you and the potential buyer are in negotiations about the sale. The letter of intent can outline a deposit you require of the potential buyer, but be careful not to include confidential information, even that regarding the business. Both you and the buyer will sign the letter.
- Due Diligence Period
After you have given the buyer a letter of intent, he or she will need to research your business. The buyer needs to be completely comfortable with your financial situations, business contracts, customer records and other important information. The due diligence clause is what protects you should the buyer sue you after the sale is final because he or she claims you were dishonest about the business.
- Purchase Agreement
The purchase agreement will outline all the terms and conditions of the sale. Your lawyer can create this document on your behalf, and the buyer will typically also have an attorney to look it over. You should cover all liabilities in this agreement, and the buyer will want to include provisions for any disputes found during due diligence. Once the agreement is settled on and the document is signed, it is a binding agreement.
You should have determined payment type at the beginning of the process, somewhere around when the letter of intent was written. After the purchase agreement has been signed, the buyer will have the agreed-upon time to pay for the portion of the business you are selling. If there’s a default on the side of the buyer, you’ll need to speak with your lawyer about reclaiming full ownership once again.
Getting in Touch With a Lawyer
Before you make any moves in selling a portion of your business, consult a business lawyer. With a professional by your side, the whole process can run more smoothly so you end up with the outcome you desire. Contact your business lawyer in Memphis, TN today to get started.
Thanks to Patterson Bray, for their insight into business law and selling a portion of your business.