Q: I am nearing retirement age and I am considering selling my New Hampshire business. What can I do now to prepare for an eventual sale?
A: Selling a business is like having another full time job. With advance planning, you can maximize the value of your business and minimize your stress.
The right legal structure can facilitate a sale that accomplishes your ultimate goals. Do you want to retain property used by the business? Consider transferring the property to a separate entity. Is your business an S corporation? Consider setting up a holding company which may attract financial buyers. Do you want the proceeds to go to your estate, consider a holding company owned by a trust. By thinking through your post-sale goals now, you will be better positioned when it comes time to sell.
Now is also a good time to clean-up any issues in the business operations before they are subject to the scrutiny of a potential buyer’s diligence team.
Legal: A buyer will want to confirm that you are legally allowed to operate your business. Confirm that you have filed annual reports with the New Hampshire Secretary of State and that you are registered in other states in which you operate.
Accounting/Taxes: If you do not have an outside accountant, now is the time to engage one. Having reviewed or audited financials will make it easier for a potential buyer to assess the value of your business.
Human Resources: Review your human resources function now to confirm that your employees are properly classified and documented and give you time to correct any deficiencies.
Contracts: A buyer will want to see consistent processes for entering into and documenting contracts with customers, suppliers and employees.
Intellectual Property: You should take steps now to make sure that your intellectual property is protected in order to monetize its full value.
Data Security: Nothing slows down a sale like a data breach. If you have not invested in data security systems, now is the time to do so.
A little advance house cleaning will enable you to address issues in advance and transparency will gain the trust of a buyer.
Finally, it takes a village. Having legal counsel, an accountant, and an estate planner that already understand your business and are aligned with your goals will help you to navigate the process smoothly and efficiently.
Know the Law is a bi-weekly column sponsored by McLane Middleton. Questions and ideas for future columns should be emailed to [email protected]. Know the Law provides general legal information, not legal advice. We recommend that you consult a lawyer for guidance specific to your particular situation.