Selling a company can involve much more than agreeing on a price. Owners must decide what they are selling, address outstanding obligations and make sure the transaction documents match the deal. Careful planning can help prevent disputes after closing.
Decide what the buyer will receive
The first issue is whether the transaction involves the company’s ownership interests or selected business assets. An asset sale may require separate treatment of equipment, inventory, contracts, intellectual property, leases and other property. An ownership sale transfers the interests in the company and can leave the business operating under the same entity.
This distinction affects the buyer’s obligations and the seller’s responsibilities, so the structure should be clear before negotiations advance.
Review debts and contracts
Before signing, the seller should review debts, pending claims, employee obligations, leases, licenses and major contracts. Some contracts may limit a transfer or require the other party’s approval.
The seller should also check for unpaid Minnesota state taxes. Certain business asset transfers may create tax duties for the buyer under Minnesota law. Good records can help both sides understand these obligations.
Put the deal terms in writing
A business sale agreement should clearly establish what each side has agreed to. Important terms may include:
- Purchase price and payment schedule
- Assets or ownership interests being transferred
- Assumed and excluded liabilities
- Representations about the business
- Conditions that must occur before closing
- Responsibilities after closing
- Procedures for resolving certain post-sale claims
The agreement should also state how to resolve any disagreements about the seller’s promises.
Plan for closing
Closing is more than exchanging payment and signatures. The parties may need to transfer records, assign contracts, deliver ownership documents and satisfy required conditions. Sellers should also consider what happens to employees, customers and business relationships after the transaction.
A successful sale depends on understanding both the financial and legal consequences before the documents are signed. Minnesota business owners who plan ahead can enter negotiations with a clearer understanding of what they are transferring and which obligations remain after the sale.