- Employee Retention Tax Credit Guide January 2023 Update - January 27, 2023
- Does the Stage of My Business Matter When It’s Valued? - April 28, 2022
- What the Great Resignation Means to Your Business - April 19, 2022
Have a Question?
Ask your question below and one of our Advisors will answer.
Typically most Cross Purchase or Buy Sell Agreements do not address the special circumstances surrounding the sale of a company. This is why we have developed what we consider best practices before business partners undertake such an endeavor:
Ground Rules for Selling a Business with Partners
Initiate a Schedule for Regular Communication Sessions with your Business Partners
You are about to sell the most valuable asset you own—your business. Without diligent attention to this matter, business partners may find themselves disappointed with the outcome.
Make the communications with your partners a priority. How? Pick a day of the week and set 45 to 90 minutes aside on your calendar for these communications. It is now an appointment—which should not be canceled. Consider it sacred.
As the actual business transaction progresses, this appointment to speak with your business partners about the sale may be necessary every couple of days or even more frequently.
Decide between Multiple Business Partners Who is in Charge
When business partners are considering the sale of their company, more decisions need to be made. And they need to do so frequently.
I recommend that all parties be given an opportunity to meet regarding the various decisions, offer their opinions, and vote. If a tie results, one partner should be designated IN ADVANCE to make the final decision.
So, the first agenda item in the partner’s meeting is to decide which person will be designated as the Business Partner in Charge.
Designate a Spokesperson and Liaison for Outside Parties
As you work through the sale of a business, you will need to carefully communicate with many outside parties. These parties may include various attorneys, accountants, buyers, brokers, bankers, etc.
Such communications can be exhausting and confusing if not planned and executed carefully. By designating one partner to communicate on behalf of the company, it improves your chances of not improperly sharing information prematurely or inaccurately.
Share the Ground Rules with Other Parties to the Sale
Once the Meeting Calendar is set by you and your business partners and you have designated the Partner in Charge and the Spokesperson/Liaison, communicating this to your outside advisors and other parties will simplify the process. And don’t hesitate letting any of them know if they have gone outside the boundaries you and your partners have established.
Executing the Successful Exit Strategy Should Include Designation of the Post-Closing To- Do List
It is natural for business partners to want to celebrate once the business has been sold. However, the post celebration reality is such that much work will be necessary by the selling partners to properly transfer the business to the new owners. It is wise to decide in advance which business partner will lead this effort. It also is advisable and equitable to compensate this business partner for his or her extra effort and accountability.
Whether multiple business partners get along well or not, establishing the ground rules in advance of selling a company should at a minimum mitigate frustrations and reduce mistakes. It’s been our experience as we work with multiple business partners that by doing so, the outcome improves.
i own 40 percent of a subchapter corp , if i quit the job i have and move on ,can i get screwed out of my equity and lose my rights ?I
Generally speaking ownership in a Corporation (C corp or S corp) does not end if your employment by the corporation ends.
That said, if you have an agreement with your co-shareholders, such as a cross-purchase agreement, there may be a clause that states you are forced to sell your stock to the other shareholders if you are no longer employed by the business. Such clauses are common in employment agreements of shareholders too.
Consider consulting with an Attorney well-versed in business law before making any decisions Terry.
All the best…
Hello, Question… beginning to think about selling to my partner.. Physical therapy practice, 3 location in San Diego…. Annual Gross roughly 1.2-1.5 million..
Net Profit yearly estimated $100k.. we each make $80k. My question is when adding back expenses etc, are both offer’s salaries added back… as the total number valued will utltimately be divided by 2 to determine what she owes me…
I’m not exactly certain what you mean by ‘as the total number valued will ultimately be divided by 2 to determine what she owes me.’
You may have a cross-purchase agreement that includes a formula to compute the value of the business. That’s not unusual.
And you may be trying to determine what the Seller’s Discretionary Income or Adjusted EBITDA is for the business. These figures are often used when valuing a small business for sale.
So, I need a little more information to clarify your situation so I may answer your question.