Sold Your Business? Don't Forget These Details
The ink is now dry on the signature lines of the purchase and sale agreement. Money has passed from the buyer’s hands into your bank account. Your business and its name are now owned by your buyer.
It’s time for you to move into your new role – whether that means an entirely new chapter in your life or a new relationship with your business and its new owner.
First, though, you have a long list of post-sale paperwork and actions to undertake in order to transition business operations to the buyer and close up what is now a shell of your business structure. Your attorney and your broker, if you’re using one, will guide you through this final post-closing activity. Here’s what to expect.
Step 1. Immediately after closing, provide the buyer with all information necessary to assume operation of your business.
What used to be your business now belongs to the buyer. That means you need to turn over all information that allows the buyer, now the owner, to assume its operations, including:
- Alarm codes
- Computer, software and online access codes and passwords
- Safe combinations
- Customer, supplier, vendor, and distributor lists and supporting information
- Keys to locks including building doors, vehicles, files and cabinets
- Operating manuals for all equipment
- Your personal contact information (if you aren’t remaining during a transition period), including where to send all material required by the purchase and sale agreement
Step 2. If your business was structured as a corporation or LLC, take legal steps to dissolve your business entity.
The vast majority of small business sales take the form of asset sales in which the buyer acquires all but specifically excluded assets of the business, including its name.
If your business was formed as a sole proprietorship, following the sale it will close automatically once you wind up business operations by following advice in the upcoming step.
But if your business was structured as a corporation or LLC, you have to dissolve your business entity:
- Meet with your board, partners, or members to pass a resolution to formally dissolve the business.
- Notify the IRS within 30 days of dissolution, using Form 966.
- File articles of dissolution with the state where your business was formed and any other state where it is registered.
Step 3. Complete forms and actions to cease operations of your business entity.
- Notify contacts for all contracts that are being assigned to or assumed by the buyer.
- Notify creditors to explain how bills will be paid, either by you or by the buyer.
- Cancel business permits or licenses, assumed business names, and other registrations.
- Give cancellation notice on your lease if it isn’t transferring to the buyer.
- Cancel insurance policies not being assumed by the buyer.
- Pay off bills and collect accounts receivable not being assumed by the buyer.
- Distribute assets remaining in your business after the sale closing, either to yourself if your business is structured as a sole proprietorship, or to shareholders, partners or members the business is a corporation or LLC.
- Close your employer ID number with the IRS.
- Close business bank accounts and credit cards.
- Close business line of credit, if any.
- Pay final wages to employees, and payroll taxes and fees due to tax authorities.
- File necessary tax forms, using the IRS “Closing a Business Checklist”
In next week’s final installment of “Selling Your Small Business” we’ll review how to properly announce the sale of your business.
Editor’s Note: This article is the 24th piece in a series taken from BizBuySell.com’s Guide to Selling Your Small Business. The guide is a comprehensive manual to help small business owners maximize their success when the day to sell arrives. Each Wednesday, Inc.com will publish a new section of the guide outlining BizBuySell.com’s best practices, from the initial planning stages of a sale all the way through negotiations and post-sale transition.