The sale of a corporation requires a great deal of organization on the seller’s part, including a complete disclosure to the buyer about all aspects of the business. Legally, sales of businesses most often go awry when the buyer later feels that the seller failed to disclose an important aspect of the business.
A sale of a business does not happen overnight. In a perfect world, the business owner begins to prepare the business for sale well in advance. In preparation for the sale, the owner should take the following steps:
Formalize records and clearly document all transactions so that a new owner can take over with minimal effort; Examine all customer and supplier contracts to avoid having contracts expire just after the sale; Document company policies and procedures; Review real estate leases, if any; Review equipment leases, if any; Fully evaluate and catalog company assets, including property, warehouse inventory, and employees; Assess computer systems; Assess key employees and company workforce; Make sure your financial records are complete and correct.
There will be tax consequences for selling a corporation. The amount of tax owed on the sale will depend upon the internal structure of the corporation and how the sale is structured. It’s a good idea to obtain tax advice on the sale.
You don’t have to use a broker to sell your business. Handling the sale yourself will save the cost of a broker’s commission (typically 10 percent of the final sale price). If you have a buyer in mind and feel comfortable working on the sale with your attorney and accountant, you may want to consider handling the sale yourself. However, using a broker does offer certain benefits. Having a broker will allow you to continue focusing on running the business until the sale goes through, and can also allow you to keep the pending sale under wraps. In addition, certain prospective buyers are more comfortable with an arm’s-length transaction involving a broker and a seller, rather than dealing directly with the seller.