Getting Your Business Ready for Sale

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Corporate Basics

  • Have articles of incorporation and bylaws been filed (for a corporation)? Have articles of organization and operating agreement been filed (for a LLC)? Most states require only that articles be filed.
  • Have you filed annual reports with the secretary of state, and are they current?
  • Do you have corporate minutes? Are the minutes up to date? If not, update them to ensure that you have minutes of all meetings, completely executed consents, and current copy of articles (charter), bylaws and other governing documents
  • Have franchise taxes been paid?
  • Have federal, state, county, and local taxes been paid (including income, sales, disability, and unemployment)?
  • Do you have shareholder, operating, and/or buy/sell agreements? Where are they, are they completely executed, and are they current?
  • Will all founders and key employees be on board for the sale? (After you receive an offer is not the time to find out. Do so before you have the business up for sale.) 


  • Are employee files current and in compliance with immigration, tax, and other labor laws?
  • Are you in compliance with minimum wage, withholding, and other similar laws?
  • Are you aware of any litigation, claims, threats, or pending terminations?
  • Are key employees and founders satisfied with compensation and/or equity interests?
  • Have you prepared and updated all necessary employment agreements, confidentiality agreements, and non-compete agreements with key employees?
  • Are you in compliance with anti-discrimination laws and health and safety regulations applicable to the workplace? 


  • Are you current on worker’s compensation, directors and officers (D&O) liability, and commercial general liability (CGL) insurance premiums?
  • Where are your copies of policies? Are there any outstanding claims or issues?
  • Do you know when policies are up for renewal, and do you expect any large rate hikes or other potential problems? 


  • How many do you have? Is that number sufficient? Do you have sufficient business not only in customer numbers but volume?
  • Do you have contracts with your customers and vendors? Can you locate them? Are they signed by all parties?
  • Are your customer and vendor contracts updated to reflect current pricing? Is documentation regarding your customers and vendors in order?
  • Is there likely to be an increase in the cost of raw materials or other goods you use in business?
  • Do you rely on one or very few vendors?
  • What are your renewal rates? What’s your recurring revenue? 


  • Do you have complete, executed copies of all contracts with both customers and vendors
  • Do you have key terms, termination and renewal dates, and amounts for all such contracts on either some software program or an Excel® spreadsheet?
  • Are your customers/contracts assignable? Will a sale of your company trigger the right of a major supplier or customer to terminate its contract with you? What is the status of customers, licensing, or suppliers? Are there any major contract problems, or losses? 


  • Are there demands, notices, or claims that you are aware of? Any pending lawsuits?
  • If so, what is the worst case/best case scenario for each? How much will attorneys’ fees and related expenses run (worst case/best case)?
  • Are there any tax notices or liens? Any contested taxes or disputed returns? 


  • Are there any environmental notices, claims
  • Do you have the required permits, licenses, and registrations?
  • Will your property pass muster if a lender requires a Phase 1 environmental audit for real estate and other certain activities? 

Intellectual Property (IP)

  • Do you have a standard assignment agreement with your employees and consultants? Have your inventors/employees and consultants assigned the rights of the IP to the company?
  • Do you have good title to your IP, and license for all other IP that you use but do not own?
  • What do your IP agreements say regarding transfer to another party? Can they be assigned? (If they are silent as to transferability or have an express anti-transfer provision, you may have to structure deal as a stock purchase or as a reverse triangulation merger.)
  • Is there a change of control provision that prohibits any transfer, regardless of the way your transaction is structured?)
  • Do you have security measures in place to protect your trade secrets?
  • Have you registered your IP with the appropriate authorities (e.g., patents and trademarks with the U.S. PTO)? Are they current? Have you filed the required renewals? 

Economic, Financial, and Accounting

  • What is the current state of the business? Are your systems and technology processes current or outmoded?
  • What is the current state of the industry? Is there consolidation? Obsolescence? A strategic shift of customers?
  • What is your company’s competitive position? Are there flanking technologies or service delivery systems that will outmaneuver your company’s product or service?
  • What is the state of the economy? Is credit tightening up? Will buyers be able to get financing?
  • What are the capital markets doing? What are interest rates doing?
  • Is your infrastructure (i.e., financial, IT, risk management, tax, etc.) adequate?
  • Do you have appropriate accounting policies? Have your accounting policies changed?
  • Are there non-recurring revenues? Deferral of discretionary expenses?
  • Have there been reversals of accruals/reserves?
  • Do you need to address issues on revenue recognition?
  • Are there any restrictions on your company’s cash or securities? Any lender restrictions?
  • What is the status of your account receivables?
Even if you do not undertake the above analysis, rest assured that your buyer will. It is better to have eliminated problems and to provide explanations and analysis for outstanding issues to the buyer. Otherwise, your potential buyer will either offer a far lower price (likely further reducing the price with discovery of significant problems) and or walk from the deal.

If you have questions or need further information, please contact us at 303.447.0975.
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