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Link to FAQ Index Page

FAQs About the Business Sale Closing Process

FAQS about the Business Sale Closing Process

 

Can you explain what happens at closing?

The business is officially transferred to the buyer at closing.  When skillfully handled and coordinated by a good intermediary, closings can be stress-free.  Closings usually occur at the office of an escrow agent and are usually attended  by the buyer and his attorney, the seller and his attorney, the escrow agent and the broker.

In most instances, the parties and their attorneys have been heavily involved in the final language of the closing documents and have previewed and approved the documents for signature.  There are multiple originals of documents that are ready for signatures of the buyer and seller and the documents are passed around the closing table for the appropriate signatures.

Prior to closing, the parties are provided with settlement statements which account for the monies the buyer is supposed to provide at closing and how those funds will be disbursed.  Before signatures are applied to the documents, the buyer transfers the required funds into an escrow account, which the escrow agent verifies.  After the signing of the documents is completed, the escrow agent disburses the funds according to the settlement statements.

It sounds so simple – just a sequence of events that are routinely accomplished.  However, it’s the hours, days and weeks before closing that can be stressful.  A lot has to come together to make closing day a routine matter.  Inevitably, there are last-minute disagreements between the parties’ advisors, often over final language in the definitive transfer documents.  It requires a talented intermediary to coordinate the effort and bring all the pieces, parts, documentation and parties together.  That’s the role we handle.  Experience counts.  From the day we list your business, we work hard to identify and resolve all issues so that closing day goes smoothly.

 

How will I be paid for the accounts receivable that come in after closing?

You can make whatever arrangements you prefer.  Usually, the customers continue sending their checks to the business address and the new owner sets aside the payments received for accounts receivable prior to the closing date for you to pick up to deposit to your company bank account.

 

How can I be assured the buyer will continue making payments on my seller financing note?

Your attorney can recommend penalty and security clauses to include in the promissory note in the event of default.  For instance, in our standard Promissory Note, after a certain grace period and notification period, the entire principal and accrued interest immediately become due and payable in full.

 

Do I need attorney or CPA services to sell my business?

Most likely you will occasionally need the services of an attorney.  There are numerous legal contracts involved in selling a business – our listing agreement, an offer to purchase agreement, a non-compete agreement, etc.  Additionally, you will need your attorney to review the definitive documents, including the Asset Purchase Agreement and Bill of Sale, that transfer the business from seller to buyer.  Also, there may be legal issues/questions that arise in the due diligence stage that require your attorney’s involvement.

You may want to use your accountant to evaluate tax consequences of a business sale.  In addition, especially during due diligence, if you are unable to provide requested financial information, or unable to answer a buyer’s questions regarding the financial records of the company, you will have to get your accountant involved.

 

How long will I have to continue being involved with the business?

Our standard Offer to Purchase Agreement includes a provision for the seller to provide six weeks of training for 30 hours per week, and to be available for telephone consultations for an additional six months.

However, the training period is a negotiable item.  A lot depends on the nature and complexity of the business.  It also depends on the extent of the buyer’s experience, his goals and desires in utilizing your services post-closing and your goals and desires in being involved post-closing.

 

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Do I have to pay off all debts at closing?

Usually debts are retained by the seller and are paid off at closing from the proceeds of the sale.  However, there can be exceptions if the buyer and seller negotiations include the buyer’s assumption of some or all of the company’s debt.

 

Will I have to sign a non-compete agreement?

Yes, in all likelihood you will be required to sign a reasonable non-compete agreement..  Our standard Offer to Purchase Agreement calls for a non-compete agreement for 5 years within 300 miles of the business address.  However, the terms of a non-compete agreement are negotiable with much depending on the nature of the business.

 

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If you have a question, send an email to jim@bizowneradvisors.com.

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FAQs about Confidentiality, Advertising and Disclosures

FAQs about Business Buyers

FAQs about the Business Sale Process

FAQs about Facility Leases and Owned Real Estate

FAQs about Assets Included in a Typical Business Sale

FAQs about Negotiating the Price Terms and Structure of Offers

FAQs about Due Diligence

FAQs about Seller Financing

FAQs about SBA Loans for Business Acquisitions