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Your Guide to Selling a Business


As the owner of the Law Offices of Steven R. Sutton and a business lawyer in Manhattan, Steven Sutton frequently works with business owners and partners who are interested in selling off shares of their companies. According to Sutton, selling a business can be tricky for someone who isn't familiar with the process.

While selling a business is not typically fraught with as many pitfalls as buying a business, the process can still be tricky for someone who doesn't know what he or she is doing. For business owners in this position, the most important piece of advice is to make sure they have a very sharp line of demarcation that explains who is responsible for what during a business sale.

On the Seller's End

Business owners need to have a clear, clean, crisp understanding of who is responsible for paying which taxes during a sale, as well as which properties are included, what condition those properties should be turned over in, and what warranties will be given to the new buyer. If you are selling a business, you certainly want it to be clear on which business issues and agreements are in place. The biggest concern for most sellers is that they get paid, which is why it is very important that they get the details in writing of what security is for sale, whether the stock will be held under escrow for a period of time, and under what conditions the seller will be able to get that stock back.

It is common for stock to be held in escrow by the current business owner's attorney until it is clear that the purchase has gone through without any problems. The seller of the company will certainly want some type of security in place, whether that is with a personal guarantee from the buyer or by going through escrow. This guarantee can ensure that the right amount of money is paid before the seller signs any documents releasing his control of the company or business.

In addition, it is imperative that both parties have a written agreement that ensures the seller will get his company back if the purchase does not go through. It is a matter of protecting the quarterback, so to speak, which is the money to the seller in this case. You want to protect the money and make sure it is going to be there.

From a Buyer's Perspective

On the other hand, the concerns are oftentimes a little different for people who are buying a new business. As a buyer, due diligence is always going to be a necessity. In particular, buyers in Manhattan need to make sure they have a business lawyer who knows what he is doing. It is important to find an attorney who can attempt to limit any possible litigation as much as he or she can, and get all contingency deals for the buyer and the seller in writing before the sale goes through.

Choosing the Right Business Lawyer

For business owners with partners, the process of transferring ownership or selling certain stakes or shares in a company can get even more confusing. When the business is first being formed, it is important to have agreements in place that define the terms of an eventual sale, along with each partner's role in the company. People think they should wait to have a written agreement, but I can say that pretty universally leads to trouble. Having a shareholder's agreement or operating agreement in place from the very beginning of a business's formation can make transferring shares and selling certain stakes in the company at a later date much easier.

To make the process of selling a business smoother from beginning to end, it's important to select the right business lawyer. In Manhattan, especially, finding the right attorney for the job can be difficult, at best. Although many lawyers advertise cut-rate prices below the average fees, these aren't the best lawyers to typically be dealing with since many take days or week to return phone calls. Any lawyer whose fees are much lower than those of his competitors should be looked at closely to make sure he has the qualifications to do the job right.

Instead of choosing the cheapest attorney, I recommend looking for a competent lawyer who has handled these types of business cases before. Beyond that, get in contact with attorneys from the very beginning of a business saleas opposed to waiting until irreversible mistakes have already been made that could cost partners thousands in litigation fees to sort out. By doing so, you can have the best chance of a successful business transaction.

This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.

Your Guide to Selling a Business

By: Steven Sutton




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