Article Summary of The Documents You Need To Sell A Business in Texas:
- The Sales Process
- Business and Operational Documents Checklist Needed To Sell Your Business
- Sales and Legal Documents Checklist
- Tips To Sell A Business
The Documents You Need To Sell A Business in Texas
If you’re reading this, then you’ve made a decision to sell a business.
You’ve come to the conclusion that selling is the right choice, and you will join the roughly 200,000 small business owners who exit each year.
It isn’t an easy decision, but you feel it is necessary.
The questions of how to sell, who to sell to, and how your legacy will be preserved have been answered.
The next step is to get down to the brass tacks: the process and the documents needed to sell a business in Texas.
The Sales Process
This is a simplified list of steps involved in selling your business. In this post, I will provide checklists for steps two and five. This will give you a leg up if you need to sell your business quickly.
- Determine the parameters of the sale
- Gather the required business and operational documents
- Find a qualified buyer
- Negotiate and complete due diligence
- Complete the requisite sales and legal documents
- Finalize the terms of the sale
- Close the sale
- Finish post-sale tasks
- Complete tax obligations
Business and Operational Documents Checklist Needed To Sell Your Business
Finding the right buyer is often the most challenging part of a sale. Using a broker can speed up the process, but comes with its own set of pros and cons.
This is a list I use when needing to buy and sell a business in Texas. Each sale is unique, and may not need everything listed here.
- Profit and loss statements (YTD and past the 3 years)
- Income statements (YTD and the past 3 years)
- Balance sheet (YTD and the past 3 years)
- Tax returns for the past 3 years
- Property deed or lease agreement (if applicable)
- Asset list (inventory, DBA, equipment, and anything else that might transfer with the business)
- Bank statements (including credit card records) for the last 3 years
- Biography of the business
- Business owner biography
- Staff details and biographies (if applicable)
- Contracts and other licenses
- Accounts payable and accounts receivable
- Sales information, including sales by customer
Additional documents may be needed, depending on your business and the requirements of the sale. I always recommend owners check with the Texas Secretary of State.
- Franchise agreement (if applicable)
- Licenses, certifications, and registrations pertaining to the company
- Patent and/or trademark information (if applicable)
- Business plan
- Marketing plan
- Procedures manual related to the business
Sales and Legal Documents Checklist
This checklist will come in handy after you and the buyer have completed the due diligence. As some of these documents are legal in nature, I highly recommend you speak with your legal team before completing a sale.
- Business purchase and sale agreement
- Asset purchase agreement (if applicable)
- Stock purchase agreement (if applicable)
- Corporate actions & resolutions (if applicable)
- Escrow agreement (if funds are being withheld)
- Stockholders agreement (depending on post-sale ownership)
- Bill of sale and assignment of rights
- Transfer of stock/partnership/membership interest (for stock purchases)
- Non-compete agreement
- Nondisclosure agreement
- Promissory note
Tips To Sell A Business
As a business owner who buys businesses, I’ve seen many sales. No sale is the same and rarely does a sale go smoothly. Here are a few expert tips.
Before the sale
1. Always put the deal in writing. Handshake deals don’t hold water in court.
2. In your business purchase and sale agreement, list and value the assets the buyer is purchasing. Make sure to list all contracts the buyer will assume, and include necessary protections to ensure you get the full sales price.
3. Make sure your legal counsel reviews the business purchase and sales agreement. This is a very important document. Do it right.
After the sale
4. Make sure to carefully consider your tax implications. An all-cash sale can put you into a higher tax bracket for the year of the sale.
5. Don’t forget to inform the IRS. Both you and the buyer need to report asset sales through Form 8594.
6. Installment payments over the following years will be taxed at capital gains rates and can provide a tax deferral.
7. Prepare a transition plan for your business and any employees. This is especially important in maintaining the terms of the purchase agreement.
Are you ready to sell your business? Did you know that 75% of business owners REGRET selling their business within 1 year? Find out if you’re ready by getting your PREScore today!