As a business owner, there will probably come a time where you’re going to want (or need) to sell your business. Whether you want to sell or are being forced to sell, there are some things you’re going to have to do to get the most value from your business and ensure the success of the entire selling process. Some of those initial considerations to make are:
- Determining your priorities
- Finding the right time to sell
- Putting together a team of experts to help you along the way
Those are pretty much the basic things you would need to take into consideration when selling your business. Many owners even acquire the top small business brokers traits to sell their companies successfully. Aside from that, there is also another side of selling your business that business owners know about but not too many shine a light on this area. What is this area? It’s the ethical and legal responsibilities you have to face when selling your business.
If you have a successful business, you can thank all the time, effort, and money that you’ve invested into your company over the years. It’s a shame that you have to sell it. Nonetheless, the time has come to sell it and move on to a new phase in your life. Now, in opposition to success, maybe your business didn’t turn out to be the success that you hoped it would be and the only thing you want to do is get rid of it. The top reason why businesses fail is due to cash flow problems. That’s enough to shut any business down.
Even if you feel like it will be many years before you sell your business, it’s a good idea to have an exit strategy in place in the event of your untimely death. Not having one in place can leave your heirs or successors having to liquidate the business and sell the assets piecemeal, leaving them with nothing for all the hard work and goodwill that was built over the years.
Whatever is causing you to sell our business, selling your business is going to be the most significant business decision you will make. It’s not like the typical business decisions you would make while running your business… it differs in the aspect that it’s a business decision you’ll make once. Selling your business is your one and single opportunity to put a price tag on an empire you’ve built. Once you signed those sales papers, business is closed. But before you sign those sales documents, make sure your legal and ethical responsibilities are in order.
Importance Of Ethics In Business
Successful companies maintain ethical standards throughout their entire business lives. These standards usually focus on fraud, sustainability and exploitation. However, many businesses also revolve their ethical standards around diversity and inclusion in the workplace. When you establish these standards, you set the tone for your entire company. They pave the way for your workers. Moreover, they assist you in attracting the right employees in the first place. Rather than throwing these accomplishments away during the selling process, maintain your ethical standards throughout. Then, you can leave your company in a way that you are proud of.
Ethical Standards To Follow When Selling Your Business
As a human being, you want to conduct yourself in an ethical manner and especially from a business viewpoint. In the event something goes wrong during the selling process and you get sued, being able to prove that your hands are clean will go a very long way in your case… if that even happens. But when it comes to selling your business, ethical behavior becomes detrimental.
As the business owner, you need to know what’s required of you from an ethical standpoint when making transactions. You can have quite the legal battle if a buyer paid a substantial amount of money for your business and didn’t get the business that they thought they would be receiving… and that’s just involving you. If you have partners or shareholders in your business, you have the potential to face a lawsuit if they feel like they didn’t get what they deserve.
It’s those reasons why you need to make sure you abide by these ethical standards: fiduciary duties and disclosure obligations.
Ethical Obligations To Partners
Partners are required to fully disclose and material facts that pertain to the business and partnership. The fiduciary relationship partners have to each other is to share any and all benefits as it was outlined in the partnership agreement.
Ethical Responsibility To Shareholders
Depending on the state you’re in, shareholders can have the same obligations to each other as partners do. Many small businesses have buy-sell agreements that specify and outline what would happen if a shareholder dies or becomes incapacitated, or if they simply don’t want to work for the company anymore. In the event that something like that happens, their agreement might state that the company will buy back shares using a very specific valuation formula.
Ethical Standards To Employees
Moreover, you have ethical obligations to your employees when you sell your business. Your workers joined your team because they resonated with your company’s values. Most businesses include honesty and fairness in their core values. You need to carry out these ethical ideals even as you hand off your business. Then, you can continue looking out for your employees and maintain a good reputation. Follow this ethic standard when selling your business.
Legal Standards To Follow When Selling Your Business
When it comes to legal standards to follow in selling your business, there are so many things to consider. Should you hire an attorney? Should you hire a broker? Both will be very beneficial to your selling process just make sure that when you hire a broker, you find an experienced broker. The same thing goes with hiring an attorney. The main thing to keep in mind, legally is that throughout the whole selling process, you need to be on your P’s and Q’s to make sure you’re doing everything within legal bounds. Any type of mistake or failure to disclose anything can result in serious lawsuits, hefty fines, and even jail time.
As far as the legalities of it all, disclosure is going to be your biggest concern. You may not realize it but failure to disclose can be considered as securities fraud. Fraud really can be used for any type of business transaction but if your business happens to be a corporation and you sell the stock in your corporation or accept stock as payment, you’re more than likely going to have to disclose even more under state and federal security laws.
There are even fraud protection strategies you can do to protect yourself from committing any fraudulent crime. If you’re considering exchanging stock, you’re going to need to seek legal expert advice on an array of issues. That means you’re going to need guidance on what you can say and what you can’t say about your business
All in all, there is so much more that goes into selling your business… you have to look at your basics as well as look at it from a legal and ethical standpoint as well. If you have your eyes open to that, your selling process progress very smoothly.