There are many ways to sell a business. The most popular are using Asset Purchase process or stock purchase process. The first involves selling the assets of the business as opposed to the entity that houses the business (i.e. Corporation or partnership). The second involves selling the stock or ownership interest in the entity housing the business.

With respect to the asset purchase, this is used if the business plans on either continuing a portion of the current business model or if the business has certain liabilities the new owner does wish to take on. The asset purchase would transfer just the portion of the business sought by the buyer leaving the remaining aspects with the seller. Assets of the business could be equipment or land but it could also be intangible such as client lists, use of the business name, and licenses.

With respect to the ownership purchase, this is used to take over the entity and everything the entity owns. The process is much simpler as the buyer simply takes the place of the seller. There is little need to undertake major transfers or any significant transition as the business can continue in the same format and structure so long as the buyer wishes it to be so.

Keep In Mind:

It is best for the buyer to always request a non-compete from the seller to ensure the buyer is protected from the seller attempting to compete with the buyer after the business transfer takes place regardless of the process taken to divest.

Also, a seller should always request the buyer sign a non-disclosure agreement prior to the due diligence period occurring so as to protect the seller’s interest.

If you are not sure where to start, give us a call. We can discuss your options and develop an action plan to ensure you are on the right side of the law.