As a small business law firm, we are reminded time and time again that putting agreements in writing during business transactions is vital in mitigating risks. It may come as no surprise than every agreement made between you and your buyer should be in writing and signed by both of you. Even if you are selling your business to a family member or trusted employee, memorializing the agreement is necessary in reducing your risk and realizing your business’ value. Most of the signing occurs at closing, where you will want to be sure that all of the following documents are properly drafted and executed or agreed to:
- Any post-closing adjustments that might need to be made even after you walk away from closing, such as finalized valuations of inventory, etc.;
- The Purchase/Sales Agreement;
- Ownership transfer documents such as lease transfer, vehicle ownership, succession documents, ownership of patents or other intellectual property, etc.;
- Any non-competition or employment agreements you have;
- The bill of sale;
- A form for Articles of Amendment to free-up the name of your business to be usable by your buyer;
- The closing sheet listing all of the financial details of the sale, i.e. how credits and expenses are to be assigned to each party;
- IRS Form 8594, the Asset Acquisition Statement to be attached to your federal income tax return, which will show an identical allocation of assets between you and your buyer; and
- The buyer’s payment, either in full or with a sizable down payment according to the negotiated terms.
This list is by no means exhaustive or required in every transaction; each business sale presents its own unique list of documents needed at closing day.
After closing day, your involvement in the business sale is not over. Your business transactional attorney will help you ease into a full transition of all transfers necessary to complete the sale of your business. Bring any additional documents or agreements you need drafted to your attorney so that you can work towards turning the page and starting a new, exciting chapter!