Trying to sell your business can be just as hard as it was to start in the first place. There are a lot of different issues that arise when closing down, or selling to a new owner. One of the most important decisions you'll have to make is how to dispose of the company's assets. In some cases, it may be necessary to do an asset sale to deal with items that are not included in the sale contract. Some owners even use asset sales to generate funds when the business is not for sale at all. Learn about some of the important considerations when selling off business assets.
Exactly What is Included?
Determining what to include in an asset sale depends on why you are doing it. Clearly, if you are selling your entire business, you will include most of the equipment and supplies that are needed to operate. In other cases, business owners may decide to sell certain items that no longer a benefit to the business. For example, if you are closing down an area of production, the related assets can be sold to provide extra capital. All in all, any item owned by the business can be sold in an asset sale.
Preparing the Documentation
The amount of paperwork involved in an asset sale can come as a surprise. Some of the common documents include an asset purchase agreement, exhibits, a letter of intent and an escrow agreement. In reality, even more documentation may be necessary. This is why it can help to work with a business law attorney that can advise which documents will be needed to complete a legal sale.
Other Important Considerations
The way businesses are sold can affect the rights and responsibilities of the future owner. Selling a business through an asset sale is usually preferred for many reasons. One of the major things to consider is that an asset sale does not pass liabilities. Once an asset is sold, it will typically belong to the new owner free and clear of any debts.
There are also many important tax issues that arise in an asset sale. As a seller, you need to arrange the sale in a way that limits the amount of taxes that you'll pay. Tangible assets are taxed as normal business income. However, intangible assets have the benefit of being taxed as capital gains.
One more thing to think about is how the business is structured. If you are operating as a sole proprietorship, you may have to sell your business through an asset sale. Yet, businesses structured as corporations are better suited for an entity sale. Thus, it is important to consult an experienced lawyer for assistance.
Be Careful With Asset Sales
All business owners should seek qualified legal help when considering a sale of their business. Many problems can arise that will affect you long after the sale has completed. Speak with an experienced attorney to get help with all the potential business law matters.
In Utah, contact Spencer and Jensen PLLC to speak with a business law attorney about contract litigation, contract preparation or any related business law issue.