Business Sale Lawyers
Selling your business is an exciting time, full of new possibilities, but it can also be very stressful. You have to navigate a time-consuming, complex process that you may not have gone through before. Working with a business sale lawyer takes many tasks off your plate while protecting your financial interests. You get the benefit of experienced, knowledgeable professionals on your side throughout the process, so it goes as smoothly as possible.
On the sell side of M&A, business sale lawyers structure the deal based on your best interests and negotiate with the buyer. They will help you weigh pros and cons to determine the most advantageous sale structure, sometimes working alongside your tax professionals to account for the tax implications of each option.
What a Business Sale Lawyer Does for Sellers
Your lawyers will also handle risk exposure by ensuring you make all the necessary disclosures at the appropriate times and limiting your liability as much as possible. They will represent you in negotiations, handling specifics such as escrow agreements, earnouts, and purchase price allocation. If you need any non-disclosure agreements as part of the sale, business sale lawyers will draft and review them alongside the purchase agreement.
Preparing Your Business for Sale
There’s a lot to do before you can complete a business sale, and many business owners underestimate how long this part of the process will take. On average, selling a business takes between 10 and 12 months. In one survey, the top regret among owners who sold their businesses was not starting to plan earlier.
Your business sale lawyers will keep you on track and make sure your preparations set you up for a smooth transaction by ticking off these key boxes:
- Gather financial records: Collect at least 3 to 5 years of tax returns, profit and loss statements, and balance sheets—the buyer will need to review these.
- Organize legal documents: Gather customer contacts, business licenses, supplier lists, and other relevant documents.
- Get a professional valuation: Have an independent appraiser establish a realistic value for your business based on current market data.
The Sale Process: From Letter of Intent to Closing
The actual sales process generally kicks off with a letter of intent (LOI) from the buyer, which expresses their intention to buy the business. The LOI outlines the preliminary terms of the deal and will often contain an exclusivity period, a time when the seller cannot continue to shop the business around.
Next, you’ll enter the comprehensive due diligence phase. The buyer will review legal, financial, and operational documents to get the full picture of your business. They may also secure loan approvals in this phase, if necessary.
Before closing, your respective teams will negotiate the definitive purchase agreement, closing conditions, and protective legal clauses. Then, it’s finally time for closing. The escrow funds will move to the seller, and both parties will sign all the final documents, including the bill of sale.
What Buyers Will Ask For in Due Diligence
Due diligence is often the most intimidating part of the sales process for business owners, especially those who haven’t sold a business before. During this process, the buyer and their business acquisition attorney review extensive documentation to understand your business.
Use the following M&A due diligence checklist to ensure you have everything ready for review:
- Financial records: Tax returns, profit and loss statements, accounts receivable and accounts payable aging reports
- Legal records: Articles of incorporation, bylaws, details of any current or previous litigation, proof of intellectual property, current licenses and permits
- Commercial and operational records: Supplier and customer contracts, standard operating procedures, asset and equipment inventories, supply chain documentation
- Human resource records: Organizational headcount, salaries, employee and contractor agreements
- IT and insurance records: Software licenses, active insurance policies, cybersecurity policies
The buyer will review these records to validate the value of the business and uncover any hidden risks.
Negotiating the Purchase Agreement
After due diligence, you can proceed with purchase agreement negotiations. Make sure these negotiations address the following:
- Purchase price and allocation
- Sale structure
- Representations and warranties
- Indemnification caps and baskets
- Closing conditions
The purchase agreement is legally binding, so work with your lawyer to cover every detail of the sale that you want included.
Protecting Yourself After the Sale
Closing on a sale doesn’t mean washing your hands clean of the deal and your business entirely. There’s still the potential for post-closing surprises, but your business sale lawyer can help you significantly reduce those risks.
Your lawyers may cap liabilities on representations and warranties through financial and time limits. The deal may also use escrow accounts to hold money to cover possible claims rather than exposing personal funds. To avoid litigation, your lawyer may add mandatory arbitration or mediation clauses into your sales contract, too.
Why Kaufman McGowan for Your Exit
Having the right team on your side makes all the difference in the business sales process, and there’s no better choice than Kaufman McGowan. Our team has deep expertise in business sales. Neil Kaufman and Sean McGowan are both known for advising clients on mergers and acquisitions, and alongside the rest of the Kaufman McGowan team, they act as invaluable strategic partners for business sales.
Contact us today to get started on your business sales deal with help from Kaufman McGowan.
Frequently Asked Questions
What kind of lawyer do I need to sell my business?
Business sale attorneys specialize in helping business owners through the sale process, so they’re the best option.
How much are seller-side attorney fees?
Attorney fees vary, depending on your location, business, and the size of the deal. Ask any attorneys you’re considering whether they charge flat fees or hourly rates. Expect to pay from $7,500 to over $50,000 for seller-side attorney fees.
When should I hire a lawyer to sell my business?
Hiring a lawyer early in the sales process will help you avoid costly missteps. At the latest, hire a business sale lawyer before you sign an LOI or begin formal negotiations. You want a lawyer on your side to review any LOI beforehand and support you during due diligence.
What is the best way to sell a small business?
The best way to sell a small business, especially if you never have before, is by working with experienced professionals, such as business transaction attorneys. Have your attorney walk you through each step of the process so you feel confident and protected.
Is an asset sale or a stock sale better for the seller?
Generally, a stock sale is preferable for the seller because it offers lower capital gains tax rates and a cleaner exit. However, the best option in your situation will depend on many factors, so discuss it with your lawyer.
What are reps and warranties, and why do they matter after closing?
Representations are statements of current or previous fact, and warranties are promises that the facts will remain true for a specific period. If the seller breaches those reps and warranties, the buyer has legal recourse. Even after closing, you’re still financially on the hook for keeping those promises.
Get In Touch
Kaufman McGowan PLLC
190 Motor Parkway, Suite 200
Hauppauge, New York 11788
Fax (631) 410-1007
additional offices:
new york city
hudson valley