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What’s Included in the Sale of Your Business?
Sellers often assume they can sell their businesses the same way large, publicly traded businesses are sold. The buyer simply makes an offer of a price per share and they take over the company lock, stock, and barrel.
That’s not the way it works for smaller, privately held businesses. The general ‘rule’ is: everything fundamental to operating the business must go with the business. But it also means that those items that are not necessary for operations are excluded. These include investments, long-term debt, personal assets of the seller, and other items.
“Assets are a key component of any successful business strategy. Knowing how to leverage them effectively is essential.”
The following assets and liabilities are normally included in the sale:
- Working capital
- Cash (but only the amount necessary to pay expenses for a reasonable period of time)
- Accounts receivable
- Inventory
- Work in progress
- Prepaid expenses
- Accounts payable
- Wages payable
- Employee payroll liabilities
- Sales taxes payable
- Furniture & fixtures
- Equipment
- Vehicles
The following assets and liabilities are normally excluded:
- Personal assets
- Investments
- Corporate taxes payable (the seller is responsible for paying corporate taxes, since they are related to past earnings)
- Amounts due to or from shareholders
- Long-term liabilities (loans, notes, mortgages payable)
Property owned by the business may be purchased or leased by the buyer.
If the buyer agrees to assume any unnecessary assets or liabilities, the sale price of the business is adjusted accordingly.
Frequently Asked Questions
What is typically included when selling a privately held business?
Generally, everything essential to operating the business is included. This usually means working capital, accounts receivable, inventory, prepaid expenses, equipment, furniture, vehicles, and any payables or employee-related liabilities tied to ongoing operations.
What items are usually excluded from the sale?
Personal assets, investments, shareholder loans, long-term debt, and corporate taxes payable are not normally included. These are the seller’s responsibility, as they are not required for the business’s day-to-day operations.
Can buyers and sellers negotiate what is included or excluded?
Yes. While certain items are standard, every deal is unique. Property may be purchased or leased, and buyers may agree to assume specific non-essential assets or liabilities.
In such cases, the final sale price is adjusted to reflect these decisions.
