Selling your Business in NY

The Eleventh in a Series of Articles for Entrepreneurs
by Bukre Ayan

You decided to sell your business for some reason. This article will explain some steps you should take starting from the decision of selling the business until the closing of the sale.

Work with Professionals

It’s crucial to work with professionals because the sale of your business is more complex than your daily business activities. Once you decide to sell your business, notify your accountant and your attorney. You may also want to work with a broker. If you are selling the business to a family member or a current employee, you may avoid paying the broker commission. But if you don’t have a trusted candidate, a broker will help to free your time to keep the business up and running.

Business Valuation

You need to decide how much your business is worth. There are different methods of valuation. You do not want to value the business too low or too high. A local appraiser may help. Also, planning the sale ahead of time may help you to increase the value of your business. It will give you the flexibility to improve the appearance of the store, boost your marketing efforts to increase sales and improve the customer base, and clean up your records to pass the buyer’s due diligence. Your potential buyers would like to review the entity’s documents and state/federal filings to make sure the company is compliant, and the records are up to date.

Gather the Documents

Prepare a list of equipment that will be sold and a list of business contracts and/or leases that will be transferred with the business. You should review those business contracts carefully to see if they have any provisions against transfer. If they have such provisions, you may want to negotiate with the other party before dealing with your buyer. Also, if you have loans, there may be restrictions on sales, or liens on assets (even if paid off). Contact your lender to arrange the payoffs and the release of those restrictions.

Internal Procedures to Approve the Sale

If you operate your business under an LLC or a Corporation, you most likely need an official meeting to approve the decision of the sale. The procedures you need to follow before or during those meetings like the notice or quorum requirements should be provided in the operating agreements of LLCs and the bylaws of Corporations. If your operating agreement or bylaws doesn’t provide about the procedures, then the NY statutory laws apply. At those meetings, one of the decisions the company should make is whether it’s an assets or equity sale – Is the entity selling what it owns, so it will have cash in the bank after the deal? Or is the owner selling all of its shares or membership units, so the company continues as is but with a new owner?

Written Contract

Ask your potential buyers to provide you with a written offer. If the sale of your business involves selling real property, the real property sale will require separate documents/filings to be prepared. You may want to ask for a separate purchase offer and the buyer may want to use a separate entity for the purchase of the real property. Review the offers carefully with your attorney. You may want to negotiate some changes before turning an offer into a written contract. Once you sign, be ready for a time-consuming process until the closing of the purchase. Be prepared for a process of at least three months, and unfortunately, it usually takes more than that.

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(Our next article in the March edition will be on Closing Your Business. To see the previous articles, please visit our website at https://www.reedbusinesslaw.com)
Please be advised that this article is not intended to provide you with any legal advice, and prior results do not guarantee a similar outcome.

Bukre Ayan is an international associate with the firm of Reed CNY Business Law, admitted to practice law in New York and Turkey, specializing in business, immigration, and real estate law. Spanish translations of this series are provided by Ms. Sylvia Espinosa, our firm’s legal intern from Mexico. Reed CNY Business Law represents individuals and businesses throughout Central New York and around the world. Contact us at bayan@reedbusinesslaw.com or sespinosa@ReedBusinessLaw.com.