Selling Your Boston Business? Checklist for Smooth Closing

Selling Your Boston Business? Checklist for Smooth Closing

We are well into 2021 now. Have you already given up on some of your resolutions for the year or are you sticking to them hoping to make this year better? Maybe you are giving serious thought to selling your Boston business? At Transworld North Boston, we understand this is a big decision and when you are ready, we are here to help with everything from listing your business to closing the deal. A smooth closing on a business deal is always the goal, but too often things do pop up unexpectedly. However, if you have a local business advisor on your side, you will have nothing to worry about.

Closing Day Prep

When scheduling your closing, we recommend doing this on a regular business day in the morning so that banks and government offices are open once the deal is done. Many business owners also find it to be a good idea to schedule the closing on the last day of the month, quarter, etc. to simplify the pro-rating of expenses.

In the weeks before closing it is important to take the right steps in preparation for closing the deal. As the seller, there are several tasks you should work on with your broker, attorney, and accountant to be fully prepared and ensure a smooth closing. Consider using this checklist as a guide.

  1. Finalize the purchase price. It should reflect price negotiations as well as pro-rated utilities, rent, etc.; the value of the final inventory; the value of final accounts receivable and accounts payable; etc.
  2. Prepare the purchase and sale agreement. Regardless of who prepares this, it should be reviewed by your attorney before you sign it. This is a great time to finalize the asset allocation of how the purchase price is being allocated across the transaction.
  3. Assemble all government and tax forms – i.e., forms required by your Secretary of State or Corporations Commission; transfer documents for vehicles included in sale; transfer documents for intellectual property; and IRS Form 8594 (Asset Acquisition Statement Under Section 1060).
  4. Put together corporate documents. For businesses structured as a corporation, your lawyer needs to pass a corporate resolution to authorize the sale. Depending on the structure of the transaction you may need to have your corporate minute books ready for inspection and presentation.
  5. Verify requirements for insurance per the purchase and sale agreement. It is important to not terminate insurance too soon and you should always speak with your agent about what insurance coverage you should have for after the closing.
  6. Prepare a list of furniture and equipment included in the sale. If any are under lease, identify those. Prepare a list of assets excluded from the sale, if applicable.
  7. Assemble contracts and agreements that need to be transferred. Put together whatever is necessary to transfer all assets and obligations that are included in the sale.
  8. Create a list (and prepare to transfer) detailing work in process. Remember to note all customer deposits and any inventory that is on order or may have been pre-paid.
  9. Prepare a final list of accounts payable and receivable (include aging reports).
  10. Assemble all loan documents – promissory note; security agreements including buyer’s personal guarantee and personal guarantees from buyer’s spouse and third-party guarantor, if any; and a UCC financing statement to be filed with your state.
  11. Arrange for transfer of building lease. If needed, gather copies of building lease and lease amendments; prepare lease assignment and assignment-acceptance documents.
  12. Draw up personal agreements (i.e., consulting or management agreement, do not compete agreement, etc.), if any.
  13. Put together exceptions to warranties and representations, if any.
  14. Develop succession agreements for employee benefit plans (i.e., profit sharing, flexible spending, etc.), if any.
  15. Put together the bill of sale.
  16. Prepare the closing or settlement sheet – list the purchase price and all costs and price adjustments to be paid by or credited to the seller and buyer. Unless the sale is closing through an escrow agent, this is typically done by the seller’s attorney.

Where is your closing?

If you are closing the deal in an attorney’s office, your attorney, the buyer’s attorney, or possibly both, will prepare and review the purchase and sale agreement. You, your buyer, and the attorneys for both sides will meet to sign the documents and transfer funds.

Who attends the closing?

  •  The seller(s) and their spouses (if there is joint ownership of the business)
  • The buyer(s) and their spouses (if there are any purchase or lender documents that need to be signed jointly)
  • Third-party loan guarantors, if any, unless they provided powers of attorney or previously signed personal guarantees
  • The seller’s attorney
  • The buyer’s attorney
  • The seller’s broker
  • The buyer’s broker
  • And anyone else who will be required to sign any documents

You’ve worked hard to grow your business and as you can imagine, the sale of your business will require a lot of documents and careful coordination of many moving parts. While the closing date is a momentous day, it is not technically the end of your obligations. Some additional details, such as mutually agreed training and transition period and possibly a cooperation period while license and permit transfers occur, are necessary to formally complete the transfer.

If you are considering selling your Boston business, hiring an experienced broker from Transworld Business Advisors North Boston will help you feel more prepared for the entire process. Our team’s expertise will be an invaluable resource when hoping to get a good sale price for your business. Whether you are in the automotive, healthcare industry, manufacturing, hospitality, or even education, our advisors are perfectly equipped to guide you within your specific market. Contact us today!