3 Must-have Agreements When Selling Your Business

“You only sell your business once. [But] while every transfer of business ownership is unique … there is a common process that is used for the sale of most small businesses.” (How to Sell Your Business)

Here’s a quick look at three essential elements of that “common process” Barbara Taylor refers to, above, with regard to selling a business:

1. Purchase Agreement:

“So you’re considering selling your company, or have already decided to do so. You know that it isn’t necessarily going to be easy. You have to identify a buyer, settle on a purchase price and the other terms of the deal, and then get through the due diligence process where your buyer ‘kicks the tires’ of your business. All of this can be daunting, especially for a first-time seller. And then you still must document the transaction with a purchase agreement.” (Venable)

2. Confidentiality Agreement:

“A confidentiality agreement, also sometimes called a non-disclosure agreement (‘NDA’), is typically the first stage for the due diligence process as parties generally are reluctant to provide confidential information to the other side without having the protection of a confidentiality agreement. The target typically proposes its form of confidentiality agreement, and a negotiation of the confidentiality agreement ensues.” (Jackson Walker)

3. Non-compete Agreement:

“You and sometimes some of your key employees will be expected to sign a noncompete agreement as part of the transaction, prohibiting you from engaging in a certain type of business for a certain number of years within a specific geographic area… Occasionally, the buyer will want you to stay with the company to either help with the transition or continue to run the company. If you are prepared to stay with the company, it is best to agree on the terms of your employment early rather than wait until the transaction has almost closed, as that is when you have more leverage.” (Wahab & Medenica)

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