By The BizBuySell Staff
Now that you’ve found a suitable buyer for your business and have agreed upon the final terms of the deal, it’s time to get organized and plan for the big closing day. For an easy transition, certain steps must be taken before, during and immediately after the deal has closed. Work with your broker, if you’re using one, and your attorney and accountant to confirm all the necessary details for a smooth closing.
Schedule your closing meeting, preferably in the morning during business hours, and when all parties are available. It’s important to schedule a time when banks or government offices are open in case you need to reach them. It’s also helpful to schedule the meeting at the end of the quarter, month or pay period in order to simplify proration of monthly expenses that transfer with the sale.
Prepare the following documents prior to the closing meeting:
- Final purchase price to reflect the outcome of price negotiations; prorated rent, utility and other fees; final inventory value; final accounts receivable and accounts payable.
- Purchase and sale agreement. You will need to work with your broker, attorney and accountant to create this document.
- Bill of sale. This proves the sale of the business. It also explicably transfers ownership of tangible business assets not specifically transferred on their own.
- Closing or settlement sheet. This should list the purchase price, plus costs and price adjustments to be paid by or credit to the seller and buyer. Unless your sale is closing through an escrow agent, your attorney will prepare this for you.
- Corporate documents if your business is structured as a corporation or LLC, you will need to work with your attorney to pass a corporate resolution that authorizes the sale. If your business is a sole proprietorship, it will close automatically following the sale and once you cease operations of your business entity.
- Government and tax forms may be required by your Secretary of State or Corporations Commission. You will also need DMV transfer documents for vehicles included in the sale, as well as documents to transfer intellectual property. IRS Form 8594 needs to be completed to show an identical allocation of purchase price.
- Succession agreements. This would be for employee benefit plans, including flexible spending, profit sharing, etc.
- Insurance requirements need to be confirmed, which are outlined in the purchase and sale agreement.
- Furniture and equipment sale list. Include anything that is still under lease and prepare a list of assets excluded from the sale.
- Contracts and Agreements. Take steps necessary to transfer all assets and obligations. Assemble all titles and leases.
- Accounts payable and receivable. Include aging reports.
- Loan documents. This includes promissory notes, security agreements and a UCC financing statement to be filed with your state.
- Building lease agreement. Include copies of all building leases and amendments; prepare lease assignment and assignment acceptance document.
- Personal agreements. This would include any consulting or management agreement and covenant not to compete, if any.
- Exceptions to warranties and representations, if any.
- Work in progress to be transferred.
Finalize the Deal in the Closing Meeting
The closing meeting should be attended by you and any other owners of the business; the buyer(s); any third-party loan guarantors (if any) unless they previously signed personal guarantees or provided powers of attorney to the in attendance; your attorney and possibly your buyer’s attorney; the escrow agent (if any); your broker and others whose signatures will be required.
The closing meeting is primarily a time to review and sign all the necessary documents to complete the transaction. The primary documents include: the purchase and sale agreement and bill of sale; lease transfers, vehicle transfers and other documents involving the transfer of business assets seller’s consulting, employee, and/or non-competition agreements; articles of amendment to change the name of your business; transfer of patents, trademarks and other intellectual property; closing and settlement sheet; Asset Acquisition Statement and IRS Form 8594; and buyer’s payment for the purchase price.
Post-closing Transition of the Business
Your business has now been passed on to the new owner, but before you move on the next phase in your life, you must close the loop on a few actions to transition the business operations to the buyer. Your attorney and broker will assist you through this final post-closing process.
Turn over all items to assume business operation
- Alarm codes
- Computer, software and online access codes and passwords
- Safe combinations
- Client list
- Supplier, vendor and distributor lists
- Keys to building, vehicles and file cabinets
- Equipment operating manuals
- Your personal contact information
Dissolve Your Business Entity
- Meet with board members, partners to pass resolution to dissolve business
- Notify IRS, using form 966
- File articles of dissolution with state where business was formed
Complete Forms and Actions to Cease Operations of Business Entity
- Notify contacts for all contracts assigned or assumed by buyer
- Notify creditors to explain how bills will be paid (by your or new buyer)
- Cancel business permits or licenses, assumed business names and other registrations
- Give cancellation notice on your lease (if its transferred to the new buyer)
- Cancel insurance policies not being assumed by new buyer
- Pay bills off and collect accounts receivable not being assumed by buyer
- Distribute assets remaining in your business after the sale closing
- Close your employer ID number with the IRS
- Close business line of credit
- Pay final wages to employees, plus payroll taxes and fees
- File necessary tax forms using the IRS “Closing a Business Checklist”.
At this point the deal is complete! You can now notify your employees and make an announcement to you customers, suppliers and the general public. Congratulations!