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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.
