Understanding the Legal Process of Selling a Business

Understanding the Legal Process of Selling a Business
  • Opening Intro -

    If you're planning on selling your business for a profit, you need to understand the legal process that is in place to protect both the buyer and the seller.

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Without this knowledge, you won’t be fully prepared to sell your company for the best price possible. So in addition to focusing on how you can increase the value of your organisation to get the most money for it, continue reading to learn about the legal process of selling a company.

Hire a Lawyer to Protect You

The right attorney who’s experienced in working with businesses will know exactly how to go about the process of selling a company with the least amount of headache. Look for qualified lawyers, such as those at Butlers, to ensure that you’ll have someone at your side throughout the entire selling process.

This professional will assist you in working out all of the details of the sale, getting everything in writing in the form of various documents like a sales agreement, and they’ll also help you with closing on the sale and filing the appropriate forms.

The Process: A Simple Breakdown

The sale of a business will either be in the form of an asset purchase or a stock purchase.
In an asset purchase, the buyer will gain all or some of your company’s assets. Buyers typically prefer this type of business sale because it means that they’ll receive all of the inventory, equipment, and other assets without having to take on any liabilities and debts.

On the other hand, a stock purchase occurs when a buyer receives most or all of the company’s stock and basically takes the place of the seller. This type of transaction is typically favoured by sellers because it means that the buyer will also take on the company’s liabilities and debts.

Whether you sell your business as an asset purchase or stock purchase, however, you’ll basically go through three stages: preliminary negotiations, the drafting up of a formal agreement along with a pre-closing review, and the closing of the sale.

Take Tax Laws into Consideration

When you sell your business to the right buyer, you may be excited about the amount of money that you’ll receive, especially if you were able to sell your company at a high price. However, you need to remember that you’ll have to pay taxes on that sale, so a lot of that money will end up going to the government. Knowing tax rules will allow you to take steps to try to lower what you owe, and the best way to do this is with the help of a professional business accountant or a tax expert.

Remember, too that the amount of tax that you’ll owe will be determined by two main factors, which are how your business is set up legally (sole proprietorship, partnership, corporation, LLC, etc.), and whether or not you’re selling the entity or the assets.

Now that you know a bit more of the legal process associated with the selling of a business, you can ensure that you’ll be able to make your sale smoothly and easily.

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