For some business owners, selling a company for profit was the entire motive behind establishing the organization they own. For others, selling their business could be the best move possible when they receive a job offer in another state or face medical challenges that make early retirement necessary.
Regardless of why a business owner has begun considering the sale of the organization, they need to proceed with caution. Mistakes when selling a company can reduce how profitable the transaction is. Mistakes could also result in legal challenges in the future.
Those intending to list a business for sale often need support from the earliest stages of the sales process to avoid potential complications later. What are some of the issues that may arise when attempting to sell a business or after selling it?
1. Disclosure issues
Large transactions generally require thorough disclosures. Those attempting to sell a business typically need to provide accurate information about company liabilities and assets.
They need to inform sellers of financial obligations and of the condition of various business assets. If a buyer discovers that there are foundation issues at the industrial facility owned by the business after acquiring it, they may take legal action because of the failure to disclose those issues earlier.
2. Complaints about competition
Frequently, buyers purchasing businesses expect the current owner to agree to certain limitations on their future economic activity. Purchasing a business for its trade secrets and market share could be a worthless investment if the owner can start a directly competing organization after the sale.
Those buying businesses often demand non-disclosure agreements and non-compete agreements as part of the transaction. They may even require non-solicitation agreements that prevent the former owner from trying to hire one of the workers at the company or attempting to do business with one of its clients. Business owners often need help protecting themselves when negotiating the terms of restrictive covenants.
3. Allegations of fraud
Business owners trying to sell their organizations often try to secure the highest price possible. Doing so usually means convincing a buyer of its worth. Business owners have to be cautious to ensure that they do not misrepresent the organization’s prospects when discussing a company sale with potential buyers or investors.
Otherwise, they could find themselves facing allegations of fraudulent misrepresentation. Those allegations could result in a lawsuit that could cost the former owner money and could permanently damage their reputation within the industry.
Business owners preparing for what could be one of the most lucrative transactions of their lives often need help protecting themselves and complying with all legal requirements. Getting the right support from the earliest stages of a business sale transaction may help sellers limit their liability.