Owners sell their businesses for many reasons. Personal motivations, new opportunities, and changes in market conditions can push you into selling some or all of your Manhattan business.
Selling a business requires a lot of preparation. The steps you take will determine whether you get a fair price and move on or spend months or even years in litigation with the buyer.
Steps for Selling a Business
When you sell a business, you will want to have some goals in mind. Your possible goals might include the following:
- Sell for the best possible price
- Sell within a specified timeframe
- Sell to a particular buyer
- Retain certain rights after you sell
These goals might conflict with each other. For example, if you need to sell quickly, you might not get the best possible price.
Based on your goals, the process for how to sell a business might differ. Thus, your first step will be to define your wants and needs. If you need to sell quickly to take care of a sick relative, you might need to be flexible on the price. If you want to sell your business to your business partners, you might not need a business valuation.
Once you define your goals, you can begin preparing to sell your business. Some steps you perform as you prepare may include the following:
Decide What You Are Selling
For some businesses, the assets for sale will be obvious. If you have a hot dog cart, you will probably sell your physical equipment, your name, and any permits you can assign. But for many businesses, it is not quite so obvious what you can or will sell.
You also might want to retain some of your business assets. Suppose that you invented and patented AI chat software. You could sell your patent with your business or retain it and only grant a patent license.
Identify a Buyer
Once you know what you are selling, you can start talking to potential buyers. Some potential buyers include:
- Business partners
- Joint venture partners
- Competitors
- Customers
- Vendors
One of the easiest routes is to sell your share of a business to your business partners. You probably talk to them regularly. They already know how your business operates. And they likely have a feel for its value.
Negotiate a Price
The price will depend on the assets you plan to sell. A patent is worth more than a patent license. Similarly, a restaurant’s name and goodwill are worth more if you also sell the recipes.
To arrive at a fair and unbiased price, you may want to obtain a business valuation. An accountant will look at your financials and put a value on your business. You and the buyer will typically use this as a starting point for your negotiations.
As you negotiate the price, you will also need to figure out how to get paid. Getting paid upfront will help you wrap up the sale quickly, but it may not be feasible for many buyers. Taking payments over time could ensure you have a steady income from your sale, but you will need to trust the buyer to make payments.
Determine How to Transfer Ownership
The nuts and bolts of how to sell a business depend on your entity type. Corporations have shares that you can sell to the buyer. LLCs have member interests that you can assign. You should speak to a lawyer about preparing the assignment documents so you do not have any disputes about whether the transfer was performed correctly.
Working with a Business Lawyer
Many businesses benefit from having a lawyer involved early in the sale process. A lawyer can help you identify which business assets you should sell and approach potential buyers. The lawyer can negotiate the terms of the sale and having been involved from the start, draft the sales contract.
To discuss how a lawyer can help you sell your business, contact Levy Goldenberg, a commercial litigation firm in New York, New York.