Selling a Business: A Checklist of the Crucial Factors You’ll Need to Consider

ByJulija A.
March 22,2022

Selling your business requires going through a sequence of well-defined steps. You need to proceed methodically so that you don’t miss out on key processes or make mistakes. 

In the following selling a business checklist, you’ll learn more about determining the value of your business, preparing a statement that outlines why you want to sell it, and the various documentation you need to support its value. When selling a business, a checklist can be a lifesaver, so let’s look at what one should entail.

Preliminary Business Sale Preparations

When selling a business, it’s critical to get the price right. If you pitch too high, you won’t get any interest, and your company will remain on the market for too long.

Before you sell your LLC, you’ll want to make sure that it’s ready for viewing. This could include fixing up any interior or exterior issues with the property. 

You’ll also want to make sure that: 

  • You have all the business documents you need for the sale.
  • You understand the actual value of your business to prospective buyers.
  • You know when you want to sell (timing the market can influence how much you get paid.)
  • You’ve had a professional business valuation.

Sale Of Business Assets Checklist

Here is a business sale closing checklist: 

1. Hire Advisors To Help Start the Business Sale Process

You’ll need to organize the following professionals and tell them about your intention to sell your business: 

  • Accountant – for filing all your business’s financial information in a professional manner.
  • Business broker – an individual who acts a bit like a real-estate agent, finding the best price for your business and then taking a commission (usually around 10 percent on a $1 million enterprise).
  • Valuation expert – a professional who understands what your business is really worth.
  • Attorney – for making sure that you follow legal procedures for commercial sales.

2. Write Down Your Reasons for Selling

You’ll want to provide potential buyers with compelling reasons for the sale. These could include: 

  • The need to move to a different part of the country.
  • Retirement.
  • Illness.
  • Moving onto a different project.

3. Organize All Your Contracts and License Agreements

You’ll want to collate the following when selling your company: 

  • Operating license agreements (for software, for example.)
  • Company bylaws that relate to the sale.
  • Dissolution of corporation status.
  • Multiple owner sign-off.

4. Ensure You Have All Relevant Documents

You’ll need both business and tax documents when selling. Business documents include things like your marketing plan, supplier and customer contracts, product pricing lists, and a written business plan.

Tax documents include all your federal and state returns for the last three years, along with profit and loss statements. These are the most important documents needed to sell a business. 

You may also require: 

  • Intellectual property documents
  • Financial statements with creditors and accounts receivable
  • Legal documents, such as stocks and shares held by the company, employment contracts, pending lawsuits, and so on
  • Business assets and associated paperwork
  • Insurance coverage and policies. 

5. Write a Company Inventory

A company inventory lets both you and the buyer know in detail what comes with the business. Examples of items on this list might include buildings, equipment, vehicles, and staff roles. 

6. Discuss Supplier Contracts

Buyers will want to know who your suppliers are. Small businesses for sale, therefore, should have a list ready. For instance, make a list of all the services you regularly use that are not a part of your business, such as cleaners or SEO agencies. 

7. Prepare for an Environmental Audit

Any due diligence checklist for selling a business should include provision for an environmental audit of your firm. Only licensed environmental auditors can perform these. They will explore:

  • Your business permits and whether they are up to date.
  • Whether your company meets environmental standards.
  • What measures you will need to take to bring your firm up to scratch if it is not already.

8. Provide Buyers With a List of All the Licenses and Permits Required To Run the Firm

For someone buying a business, the checklist of needed permits and licenses could include: 

  • Land use permits.
  • Tax registration.
  • Business sector licenses.
  • Environmental permits.
  • Liquor licenses.
  • Business handover permits.

These licenses may not automatically pass over to them when they purchase the business, so you need to be prepared for extra legwork. 

9. Tell Your Employees

Once you’ve put the groundwork in place, you’ll need to tell your employees what’s happening. Inform them whether they will keep their jobs, what corporate policies might change, and who the new owners are. 

Always treat employees well and engage with them in concert with the buyer. They are a valuable asset to the firm, and you don’t want extra trouble in the form of lawsuits from disgruntled workers.

10. Identify Outstanding or Unfinished Work

Tell the buyer which projects or contracts are ongoing and yet to be fulfilled. Check domain renewal dates for your business website. 

11. Prepare Succession and Confidentiality Agreements

Use your attorney to draft a succession agreement that will formally transfer your business to the new owner. 

Also, get them to prepare a confidentiality agreement. This protects you from buyers who might misuse financial information regarding your company. It also prevents any sensitive information from becoming public. 

12. Prepare and Sign the Sale Documents

The final part of the process is to prepare and sign the sale documents. You’ll need: 

  • An indication of interest, which is a document signed by both parties before buyers learn more about business assets or get copies of other documents, such as tax returns.
  • A letter of intent, which is a sign of a pending purchase.
  • A purchase agreement, to be signed by both you and the new owner once you finish the negotiations.

Once you’ve signed all these documents and followed the proper legal process, the business sale is complete. 

Conclusion

In this article we ran through all the things you need to do to sell a business successfully. Usually, the buyer will pay the closing costs, so you don’t need to worry about these. Just remember to go through each of the factors we’ve mentioned carefully as forgetting any of them could compromise the sale of your business.

Frequently Asked Questions
What is the best way to sell a small business?

The best way to sell fast is to use a guide to selling your small business, like this one. Make sure that you prepare all the groundwork first before you push ahead with contract negotiations. Always follow a process, ticking off items along the way

When selling a business, how do you value it?

Franchises for sale usually have a set value, but private companies require price discovery. The best way to value a business you want to sell is to hire a valuation expert in much the same way you’d hire a real estate agent when selling your property. These professionals inspect your business and then tell you how much it is likely worth so you can get a ballpark idea of what to aim for. 

What permits do I need when selling a business?

If you sell taxable products, most states require you to get a seller’s permit, regardless of whether you have physical or online premises. You’ll also need to collect sales taxes – something the seller’s tax allows you to do. 

What paperwork is needed to sell a business?

To sell a business, you’ll need a Business Bill of Sale. This document spells out key details for the buyer and seller, and also provides a record of the transaction. Make sure that an attorney experienced in corporate sales drafts the document for you. Also, don’t forget that when selling a business, a checklist of all the important steps required for a smooth sale will help you immensely.

About the author

Julia A. is a writer at SmallBizGenius.net. With experience in both finance and marketing industries, she enjoys staying up to date with the current economic affairs and writing opinion pieces on the state of small businesses in America. As an avid reader, she spends most of her time poring over history books, fantasy novels, and old classics. Tech, finance, and marketing are her passions, and she’s a frequent contributor at various small business blogs.

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Business planning is an essential part of success, but people often forget that it doesn’t end once your enterprise starts doing well. It can be easy to forget about a succession plan when your business is thriving, but it’s in your best interest not to.  In this guide, we’ll talk about all the benefits of such a plan and present a checklist that will guide you through the process of business succession planning. What’s a Business Succession Plan? A business succession plan is a step-by-step set of instructions on procedures and processes detailing how your business will continue to function if an entrepreneur, business owner, or even a key employee leaves.  It answers questions like who will take over the affairs of the business, how long this succession will take, and which operating processes and procedures will be maintained or changed. 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It Aids in Identifying the Most Qualified People in Your Company One of the most important benefits of succession plans is that they allow business owners to see which employees are best suited for the transition. This is a key aspect of succession planning for business owners and plays a key role in the continued success of the company’s operations. With a succession plan, you get to see which of your employees are most qualified as future leaders. It also helps to narrow down which positions within the company are most critical for its success. It can also shed light on potential vulnerabilities, helping identify and remedy them. For example, If there are no employees suitable for leadership roles within your organization, you would know to look externally early on. 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This early tapping on successors puts you and your business ahead of the curve, giving everyone enough time to prepare and build the skills or experience needed in leadership and other roles. It’s an excellent method to consider even before you start thinking about how to transfer business ownership to someone else down the line. It’s also an excellent way to let employees know you are willing to invest in them. It Maintains the Brand Identity of Your Business Succession planning helps identify employees that can keep the torch burning within the company and helps ensure that a brand identity built over several years doesn’t get thrown out the door when there’s a change in power. Even when there’s a new boss around, succession plans help ensure nothing crucial changes. It Puts Extra Eyes on the Job Succession planning is a company-wide exercise, meaning that you can have junior managers and veteran staff working together on the same tasks. 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This just shows that succession planning is crucial in ensuring that the best people for the job inherit the key responsibilities. Record and Formalize Your Standard Operating Procedures Recording your SOPs for future reference is something that every small business owner should do daily. It is beneficial for employees and any future owners. They vary depending on the business, but most SOPs usually include: Org Chart Operations Manual IT Manual Employee Handbook Training Programs Skill Retention Strategies Performance Management Meeting AgendasEvaluate Your Business There are many succession planning best practices, but one of the most essential is evaluating your business. How much is your business worth? You should have a rough idea about this at any stage of running your business. Don’t make the mistake of overvaluing your business, though, as it can lead to poor financial planning. There are various ways to do it, too, from using a business valuation calculator to a professional appraiser. Some companies like Guidant Financial offer valuation services for businesses.  Handling the Finances of Your Succession Plan Your succession plan must cover how someone will buy your business - by paying a lump sum, purchasing it in installments, using credit facilities, or some other option. You should also have a buy-sell agreement, a legal document where the buyer agrees to an action that enables them to purchase your business. To draft this agreement, you’ll also need to meet with a legal professional, such as a business succession planning attorney. Succession plans are typically funded in one of the following three ways: Life Insurance: usually more common in family successions. 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By Julija A. · March 21,2022
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Being constantly present at the listed location isn’t really possible from a practical standpoint. As such, stepping out for one moment at the wrong time can result in unnecessary inconveniences for your business.  Receiving a Lawsuit  at Work If your business is facing a lawsuit, then service of process documents will be sent to the listed address. Since you’re the business registered agent, you will be served the lawsuit at the relevant location. This can be embarrassing and undermine the credibility of your business if it happens in front of your employees or customers. The Costs of Fighting Default If you are not at the registered office when the process server shows up and you fail to receive the notice of the lawsuit on time, your business may face substantial costs for default judgments and lawyer fees. Ultimately, this defeats the purpose of trying to save money by being your own registered agent.   If You Use a Personal Address, It Becomes Public Record If you are running a small business from your home, then being your own registered agent means your private home address becomes a public record. This can be a serious issue if you’re concerned about your privacy. And even if privacy isn’t your main concern, having both your business and personal affairs tied to the same address can become problematic after a while. You Will Be Limited to Operating in One State  To become your own registered agent, you’ll need to show proof that you’re a resident in the state where your business operates. This limits your operations to the state that you’re registered in. Unless you’re willing to hire another registered agent, you won’t be able to expand and set up offices in other locations. Every state requires businesses to use a registered agent with a local address. Should I Hire a Registered Agent Service? After weighing the pros and cons, it’s clear that it isn’t advisable for business owners to become their own registered agents. This brings us to registered agent services. First and foremost, hiring a professional service eliminates your exposure to all the aforementioned risks and downsides. You can focus on running and growing your business, knowing that every legal document is being received and forwarded in a timely manner. When it comes to privacy, registered agents use their official business address, not yours. This means that sensitive information about your physical address is kept private. You also don’t need to make yourself available during working hours and can expand to as many states as you want.  When you're starting your business, it’s perfectly natural to ask: Can I be my own registered agent? But there are many reasons to consider professional registered agents instead of taking this burden onto yourself. Keeping up with all the compliance requirements set by the state where you’re forming your business can be tasking. A registered agent service can be a big help with things like filing annual reports. The service keeps tabs on your due dates and informs you about approaching deadlines. The only real downside to hiring a professional agent is the cost. Prices vary, depending on who’s offering the services, but you typically expect to spend around $100 annually. Further Reading White Label vs. Private Label: Differences Explained Opening a Campground: A Step-by-Step Guide How to Start a Meal Prep Business? A Step-by-Step Guide Final Thoughts Whether you choose to act as your own registered agent or go with a professional service is entirely up to you. It’s perfectly legal to do both, but the former isn’t always advisable.  The downsides can outweigh the cost-cutting attempts by small businesses that are operating on a tight budget. So be sure to take a step back and carefully review all your options before appointing yourself as a registered agent.
By Nemanja Vasiljevic · March 25,2022

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