After investing years of hard work, time, and money, you have decided to sell your law firm business. Selling your business is one of the biggest decisions a business owner can make. Depending on the circumstances surrounding your decision to sell, this may be an incredibly stressful time. It is very easy to get caught up in the emotions of the decision. Importantly, however, executing on this decision requires much thought and a methodical approach, so you can maximize benefits of the decision and minimize the risks.
As best as circumstances allow, planning ahead is key. Of course, there will be situations where a business owner is not able to plan ahead and the sale of the business must be completed in a short amount of time and under less than ideal conditions. But if you can plan ahead, it is prudent to do so. It can take a long time to find the right buyer, negotiate the terms of the sales agreement, and close the deal. You still need to run the business in the meantime, and maintain or hopefully increase its value during this time.
Before negotiating a business sales agreement, it is important to know what terms will be sticking points for you. Obviously the sale price will be a huge consideration, so you have to determine what amount will be worth it for you to part with your business and balance that with a realistic asking price, given the state of the market. Other terms may also be important to you -- will you be able to continue working in the industry after the sale or will you agree not to compete, will the name of the business change, how communication to clients regarding the sale will be handled, to name a few issues that may arise. These, and other issues, may be important to you, and you will need to enter into negotiations with a clear idea of where you stand on these items.
Have a Business Attorney Prepare the Sales Agreement
Whether or not you have any experience in business, it may still be prudent for you to have another attorney prepare the sales agreement for you. An outside attorney will not be clouded by emotions, and may spot issues that you do not see. At the very least, an attorney experienced in drafting business sales agreements should review the agreement.
Terms to Address
The actual sales agreement is obviously the most critical piece of selling your business. It is imperative that it is drafted carefully, and is an accurate reflection of the agreed upon terms. The agreement should address every aspect of the sale, leaving no ambiguity as to the parties' intent. Specific areas that the agreement should cover include:
- Identification of the parties and the business being sold
- What assets are being sold as part of the transaction
- Sale price
- Whether the seller is agreeing not to compete for any period of time
- Payment terms and any penalties for late payments
- What inventory is included as part of the sale
- Whether there an assignment of any leases included in the sale
- Any representations or warranties
- Whether any intellectual property is included in the sale
- How the business will operate during the transition and closing of the transaction
- Any contingencies
- Broker fees
- Forum for any disputes that may arise out of the agreement
- Date of closing
- Compliance with any local, state or federal law