As a Winter Park lawyer, it is an honor for me to be asked to represent a local business owner in the potential sale of his or her business. The sale of a business involves legal, financial and emotional considerations — and many questions must be addressed.
Is the timing right for the sale of my business? What are the first steps? Will I be protected throughout the process? These are questions that my firm and I can help you answer.
There are also questions that relate to your personal goals. What do you hope to accomplish by selling your business? Are you looking to retire? Alternatively, do you want to remain in the industry? Is your goal to cash out immediately or to receive payments over time?
The negotiations for the sale of a business begin with a non-binding letter of intent (LOI). The LOI sets out the basic terms of the proposed sale. These terms include the sale price, the timing for the buyer’s due diligence, and whether or not the sale is to be an asset sale, a stock sale or sale of an ownership interest.
Skilled legal counsel will work closely with both the seller and the seller’s tax professionals when negotiating the terms of the LOI. A sophisticated buyer will analyze exactly what he or she is buying — a process that can drive the legal structure of the sale.
For instance, if the seller holds certain industry licenses, or if the seller has long-term contracts that must remain in place, then the sale of stock or an ownership interest may be the most appropriate format.
Or, if the buyer is purchasing only the business’s customer lists and furnishings and fixtures, then an asset sale may be better. In addition, the sale of intellectual property such as trademarks can also impact the structure of the sale. It is imperative that the seller has experienced legal counsel to help guide this process.
Next, has the seller considered the potential interruption to his or her business that will inevitably take place during due diligence? The buyer will require detailed financial information and may want to interview management-level employees while “kicking the tires” — like a shopper test-driving a new car.
In representing sellers, an experienced lawyer will negotiate important parameters and guidelines to which the buyer must adhere during due diligence. Doing so allows the seller to minimize disruption to the business and preserve its value in case the sale does not close.
An important consideration for the seller is: “What is the value of my business without me?” In situations where the business owner is also the primary contact for the company’s clients, it is reasonable to expect a buyer to require the seller to remain involved after the transaction is complete.
This involvement can take the form of a short-term employment agreement or a consulting services contract.
Another pertinent question for the seller: “After I sell my business, am I willing to remain out of the industry for a period of time?” In nearly all cases, the purchaser will want assurances that the seller will not form a new company and compete with the buyer’s business after closing.
Importantly, non-solicitation agreements and covenants not to compete are generally enforceable against an owner who sells his business, so long as those restrictive covenants comply with applicable Florida law.
These are just some of the important questions that seller’s legal counsel will help a business owner answer about the potential sale of her business. It’s an honor for our firm to serve business owners in Winter Park, and throughout the state of Florida.
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