Seller’s Checklist

For most business owners, the sale of their company is one of the most significant decisions they will ever make. With up-front planning and preparation, owners can maximize the potential purchase price of their business while minimizing the legal and accounting fees associated with the sale. The prospective buyer will want to perform his own due diligence after making an offer and before closing. The business owner that is able to promptly produce all requested documentation in good order will quickly build confidence with the buyer.  That confidence will pay off on the closing date.

Here is a checklist of issues that you, the seller, should address as you prepare to sell your business. This list of issues is not complete. Every deal is unique and presents different business-specific concerns. This list represents issues that frequently arise and, when properly addressed, will best position you to receive the maximum value when you sell your business.

Corporate Documents. Confirm that the corporate organizational documents are properly filed and that the business is in good standing in the jurisdiction where it was formed and is qualified to do business in all states in which it operates. Further, you should have all corporate records organized and ready for review. You should also confirm that all corporate documents are updated and that the business has been operated in compliance with the relevant documents.

Compliance.  Confirm that all State and Federal mandated reports are filed and up to date. Confirm that all OSHA required reports are available and current including the annual OSHA 300 report. Also confirm that all ISO and other certifications are currently active and be able to present when the next review date is.

Contracts. Make sure that any contracts and long term orders with customers and suppliers are available and up to date. Such contracts that are necessary for the future operation of the business should be assignable to a buyer and should not terminate or expire for a reasonable period of time following the sale. Additionally, you should confirm that no contract gives any party a right of first refusal or other interest that could preclude or impede the sale of the business to a third party.

Legal Issues. Resolve all pending and potential legal issues, claims and regulatory issues. Be prepared to discuss openly any past issues. These issues may include any pending or potential Workman’s Compensation actions.

Real Property. Ensure that all real property owned by the business or separately by the business owner or related parties is properly documented and titled.  Check that all real property used in the operation of the business is correctly zoned for current operations and in compliance with all local ordinances and covenants.

Personal Property. Confirm that the business has title to all significant items of personal property. Perform a lien search to confirm that all such personal property is unencumbered. Confirm that all leases of personal property required for the operation of the business are assignable.

Lease Issues. If your business leases a building or real property, make sure the lease is assignable to a buyer. If a significant lease contains a prohibition against assignment, you may be forced to negotiate with a landlord at the 11th hour of the deal. If the business has revenue-producing property, you should confirm that adequate leases are in place to ensure the future rental income for the potential buyer.

Taxes. Confirm that all tax obligations are current and that all filings and returns are up to date.

Environmental Issues. Are there are any environmental hazards on the owned or leased property for which there could be potential liability to a prospective buyer? Evaluate the benefit of obtaining a Phase I or Phase II environmental assessment and begin addressing potential environmental issues right away. Addressing these issues before closing the sale will expedite the sale process.

Employees. Focus on retaining your management team and key employees. Your people who know how to operate the business and know the key customers and suppliers are very important to the value of your business. They are the bridge between your exit and the buyer’s entrance.

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