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What Steps Do I Need to Take When I Want to Sell My Small Business?

Posted by Katherine L. Taylor, Attorney | Nov 10, 2020 | 0 Comments

You've owned a small business for a while, probably. It's been either a great experience or a headache, but for whatever reason, you want to sell it or pass it along to another generation or another owner.

You've never done this before and you're not sure what's involved, but I can help.

The first thing that you need to do is to carefully analyze your business from all angles. You need to obtain all of the business documents: these are the governing documents of your business, whether you're an LLC or a corporation.

Corporations are probably going to have a lot of documents, and you need to make sure that all of the required documentation is up to date. You're going to need to find your stock certificates, your articles of incorporation, your bylaws, and any other minutes of your board and shareholders meetings.

If your business is an LLC, you won't have quite as many documents; you're going to have articles of organization and perhaps an operating agreement. You probably do not have any minutes, but you may have resolutions of the LLC. Get all those business documents together.

Next, you want to make sure your business is in good standing with the state in which it was organized or it operates. Many times, business owners don't realize that their company has fallen out of good standing, and many times getting back is just a matter of filing a short document with the state.

Once you know that your company is in good standing, you want to make sure that you know the value of your business. Many people don't know how to value their business, and many people put a much higher value on their own business than they should because they've put blood, sweat, and tears into the business for a lot of years. But even though a lot of that sweat equity isn't necessarily saleable, you probably do have an asset worth something. The best way to determine the value out is to have your business valuated by a professional valuation expert; the service can be costly, but it is worthwhile in the long run.

The next thing you need to do is either hire a broker or just let people know that you're selling your business. 

When you do get a potential buyer, it is crucial that you put your agreement in writing, and you need a very detailed contract that explains whether you're selling the ownership interest or the assets. If you're selling the ownership interests, what are the conditions are that are attached? If you're selling any assets, what assets are going to be sold? Are you going to warrant any of the assets?

This is something that you should not do yourself; I highly recommend that you have a lawyer prepare a purchase agreement when you find a buyer because if you mess this up, you could end up not getting what your business is actually worth.

Once you finally have that contract of sale in hand and signed, you can feel comfortable that you're going to reap some value that you've put into your business after all these years.

If you need any help, please give me a call or email; you can find my contact information below and at taylorlegal.com.

KATHERINE L. TAYLOR, ATTORNEY AND CPA

5850 Waterloo Rd

Suite 140

Columbia, MD

21045 443-420-4075

443-420-4075 (fax)

About the Author

Katherine L. Taylor, Attorney

Katherine founded Taylor Legal after serving for 10 years as Senior Assistant County Solicitor for Howard County Government, and 7 years as a commercial litigator at Whiteford, Taylor & Preston, a premier law firm in Baltimore, Maryland.

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