What The Process Of Selling A Company Entails

Comments Off on What The Process Of Selling A Company Entails 14 May 2011

The process of selling a company usually begins with pre-negotiation in which the buyer either offers to buy the assets and name of an existing organization or a certain number of shares of stock. The first is beneficial to the buyer, while the second is more beneficial to the owner. In some cases, one business will merge with another, forming a new company.

During the negotiation process, a buyer may offer to purchase some or all of the assets of the existing business. If he wishes to continue operations under the same name, he will offer to buy this as well. A seller should attempt to value the business based upon the assets it owns and the possible profits it will make over an allotted period of time.

Owners of S-corporations, which are small businesses, are referred to as shareholders. They usually operate in the capacity of a manager or participate in the operations as well. When they sell their stake in the business, they sell the shares that they own. The new owner then takes up the activities of the previous owner. In many cases, if others own shares as well, they will first need to approve the sale.

There are numerous documents which the potential buyer should request to examine prior to signing a contract. First, the tax returns and accounting books from the past several years are very important in detailing the profits and losses of the organization. Employee or union contracts and terms of any loans or leases will also provide pertinent information. Each of these should be reviewed thoroughly.

Once the two parties have agreed upon a price and review of the documentation is complete, they can settle on a date for completion. A new contract should be drawn up that states the stipulations of the sell. Each party signs the contract after all of the details are hammered out.

Unless there are certain provisions within the contract, the new owner will be free to act in any manner he sees fit regarding operations and the assets purchased. As of the final date for selling the business, the seller will no longer have any rights to the company.

If you are looking at getting a business valuation you might also want to consult an expert on the procedure of exit planning

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