After decades of hard work, selling your business can be an exciting and rewarding time. Yet, many business owners overlook some important legal matters associated with sales. In this article, we’ll explore three of the most significant legal mistakes sellers make when selling a business.
1. Use an NDA
The first critical mistake that business owners make is skipping a non-disclosure agreement. Before disclosing to any buyers that a business is on the market, a business owner should always make sure that a non-disclosure agreement is in place.
NDAs restrict who does and does not know your business is for sale. If competitors or employees learn confidential information about the business for sale, it could hurt the sale and possibly lower the selling price of the business.
2. Hire an Attorney
It may be tempting to skip working with an attorney, but you shouldn’t. If you are selling a business or anything of significant value, you need to work with a lawyer experienced in the area of sales.
Business owners become accustomed to doing a great many things themselves and learning on the job, a personality trait that has served them well over the years. When selling your business, however, there is zero room for “on the job training” or relying on your own instincts. One of the best ways that you as a business owner can protect your future is to work with a lawyer when selling your business. In fact, a Business Broker or M&A Advisor can be a vital resource for helping you to find a proven lawyer with a background in the buying and selling of businesses.
3. Get a Letter of Intent
A third significant mistake that business owners frequently make when selling their business is that they fail to get a letter of intent. Much like an NDA, a letter of intent is a key legal document in the process of selling a business. All too often business owners will skip requesting a letter of intent out of fear of slowing down the process and potentially disrupting a deal.
The letter of intent is designed to clearly spell out expectations while simultaneously protecting your interests as a business owner. When buyers sign a letter of intent, it indicates that they are taking the process seriously. This will protect you from wasting your time.
Selling a business is a process with its own unique challenges. Whether dealing with human psychology, organizing your books, thinking about what information prospective buyers are likely to want to see, or addressing a wide array of legal issues, selling a business is a complex and time-consuming process. Working closely with a Business Broker or M&A Advisor is one of the fastest ways that you can increase your chances of a successful sale.
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