As a business owner, your company is like your child. You have watched it grow up right before your eyes. You have been there for the good times, the bad times, and all you want is for your company to have a bright future. This is especially true when you are selling your business. To stay with the child metaphor: it is like your children are going off and getting married. Although you will no longer be watching over them, you want to make sure they are well taken care of in the future. The same goes for your business.
Managing the sale of your Business
When selling a business, it is customary to make certain promises, known as representations and warranties, regarding the condition of every facet of the business. These include, but are not limited to, the accuracy of financial statements, the seller’s title to the business assets, compliance with tax and regulatory requirements, the enforceability of contracts, and matters concerning the company’s workers. It is also customary for the seller to indemnify the buyer against loss arising from any existing debt or obligation of the business not expressly assumed by the buyer. This means that once the business is sold, you could be held responsible and be required to compensate the buyer for any problems that may arise due to indemnification promises in connection with the sale, pre-existing debts, or the inaccuracy of any of the representations and warranties.
Without proper legal protection, your personal assets, including the purchase price received on the sale of the business, and potentially much more, could be at risk. However, you do have several options available to help minimize and protect against the financial harm caused by such personal exposure. These include:
- non-recourse contracts
- liability caps
- indemnity baskets
- representation and warranty insurance
- retitling assets
- asset protection trusts
Consult with your legal counsel to determine which of the above protections are best for your unique situation in order to minimize the risk of financial loss. If you have questions, please contact Offit Kurman business attorney Ted Offit at firstname.lastname@example.org or 301.575.0304. Mr. Offit often serves as special counsel to businesses seeking to implement succession plans through a sale (merger and acquisition) or through transfers to affiliates (family members and employees).
Offit Kurman Attorneys at Law: Mergers and Acquisitions (M&A) Practice Group
Over the years, the attorneys in our Mergers and Acquisitions (M&A) Practice Group have earned a strong reputation for handling efficiently and optimally the gamut of business combinations and sale transactions regularly faced by private enterprises. We regularly represent mid-market companies in deals of varying size and complexity.
To learn more about Offit Kurman’s Mergers and Acquisitions (M&A) Practice Group,, please fill out our contact form to access the sound legal guidance of our experienced business law team of attorneys. You can also connect with Offit Kurman via Facebook, Twitter, Google+, YouTube, and LinkedIn.