What The Process Of Selling A Company Entails

During the pre-negotiation process of selling a company, which occurs prior to the actual sale, one person makes an offer to purchase all of the assets and the name of a business. Sometimes they only offer to purchase a stipulated amount of shares of the organization. The first allows the buyer to obtain full ownership of the company and its possessions, while the second may allow the seller to retain some rights. In the case of a merger, two businesses will join to form one new entity.

Negotiations begin with the potential buyer making an offer for some, or all, of the assets of the company. He may also offer to buy the name in hopes to continue operating under that title. The seller has the option to accept or decline this offer, based upon what he thinks the company should be valued at. This is one of the most difficult parts of the process, as it is a measure of all assets owned and the future profits to be made.

With S-Corporations, the current owner will sell his shares of stock to another person. That person then owns a certain percentage of the business and usually takes over, acting in the same capacity as the seller. If the seller does not own a majority of the shares, he or she will need to seek the approval of the other shareholders.

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.

The final piece to the whole process comes following the complete review of the documents and an agreement on the price. At this time, a contract will be made by a legal representative, which both parties will sign. The contract will state all of the terms to which both parties must comply and the date that the actual exchange will take place.

The final date, or closing date, should be established. At this time, the transfer takes place and the buyer assumes ownership of the business. Since he now owns the right to the company, he is free to continue operations or sell the assets as he sees fit, unless the contract restricts him from doing so.

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