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You’re a small business owner. You’ve been approached by someone who may want to
buy your business and you’re frankly interested in the possibility. I’m Tom Oldfield. I’m
a lawyer in Fircrest, Washington and I practice in the area of business and real estate. There
are a number of questions that need to be answered in this area. The first question
that comes up is whether you need a lawyer. In most cases, the answer is yes. The sale
of a business is a complicated transaction that involves a number of factors, including
taxes, liabilities, how the sale is to be structured, how it’s going to be closed
– all sorts of things that you likely don’t have the expertise to handle on your own.
The first document that’s going to come up, after you’ve been talking to the purchaser
and have some understanding of what the terms are, is the preparation of a term sheet. The
term sheet isn’t going to be the complete understanding. It’s going to set up the
substance of the transaction and what you agree on, with a provision that you and the
purchaser and your lawyer and the purchaser’s lawyer will work out the final purchase and
sale agreement. That’s going to be memorialized or drafted down into a final purchase and
sale agreement that is going to set out all of the terms. And what are those going to
include? Obviously, they’re going to include what you’re selling. The first question
probably is whether you’re going to sell – if it’s a corporation or an LLC – whether
you’re going to sell the business or whether you’re going to sell the assets. In most
cases, the purchaser is going to insist on buying only the assets for a number of reasons.
But the biggest one is they don’t want to assume any liabilities other than what they
specifically assume. If there’s a potential lawsuit out there, where someone hasn’t
sued the company or the LLC, the purchaser isn’t going to want to buy that. So, it’s
probably going to be an asset sale. That’s going to be something that’s going to be
negotiated. What happens to your employees? In most cases, you’ll terminate your employees
at closing and the purchaser will either rehire all or selected employees. That also raises
the question of what happens with collective bargain agreements, whether the union is going
to continue to represent the employees, and all of those issues that come into play. There
are other things about what representations or warranties that you might make and how
the closing has been handled and particularly if you’re going to be involved after the
sale. Whether you’re going to be involved as an employee or a consultant, and how that’s
going to be handled and how you will be compensated. Here’s what I want you to do. If you have
questions on this, pick up the phone and call me. I’ll be happy to work with you. I’m
Tom Oldfield. Thank you for watching this video. Have a good day.