An article on NYTimes.com outlines how making sure all the details are accounted for when selling a business. Randy Siller explains how a well-developed sales plan can ensure a smooth transfer.
Holly Hunter didn’t realize she was making a critical mistake, but as a post from the New York Times shows, not paying attention to small details in a business deal can cost everyone big bucks.
She was paid a third of her selling cost, almost $1.5 million, up front, and the rest was to be paid in installments. About a year later, though, the money stopped coming. It wasn’t because the person who bought the company was ignoring the payments: there was no money to be paid because the person declared the business bankrupt.
When Hunter sold her business, she was unaware that a non-compete agreement with her and a former employee didn’t transfer. This employee wasn’t happy with the way the business was functioning under the new owner and was frustrated over some of the unnecessary services they felt they were being forced to provide to existing customers. The employee quit, and took a large chunk of the staff with her.
Hunter attempted to sue the employee when she found out her leaving was the reason the business tanked. However, Hunter was told there was nothing she could do, as the non-compete didn’t transfer when she sold the business.
These are the kind of oversights Randy Siller of Siller & Cohen can help prevent. There’s plenty of reasons to sell a business – the market may be changing, retirement could be upcoming, family needs could be shifting or the owner could simply be burnt out – but no sales should be done in a hasty manner and there should always be a plan in order.
Randy Siller says there are a few routes that can be taken in order to sell or pass on a business. A business owner needs to know if he or she is willing to work for a couple of months or years with the new ownership in order to make sure the transition goes smoothly, or whether it should be a clean break. Also, whether the business should be sold as a whole for one price up front or paid out over a period of time has to be determined.
There’s also the option of transferring the business to another part of the family. This allows the owner to still provide for family members by creating employment for them while also removing the business from his or her taxable estate.
Randy Siller has been with Siller & Cohen for more than 25 years. The firm houses attorneys, taxation professionals and more.