Whether it’s a family business that you plan to turn over to your children, or whether you plan on selling your business to an outside buyer, every business owner should have an exit plan. Once you’ve decided to sell, how do you begin letting people know, especially if you’d like to keep the sale quiet until it’s a sure thing? One way is to use trusted sources in your industry. Another way is to use a business broker who can assist with appraising your business and then looking for buyers while keeping the seller confidential. At some point, the buyers will need to know who the seller is. A non-disclosure agreement can help protect the knowledge that you’re selling your business and can also protect information the buyer learns about your business while vetting it for sale.

If most of the major terms have been agreed upon, the non-disclosure of information about the business can be wrapped with a letter of intent. A letter of intent discusses the major terms of the purchase, including consideration, what is to be purchased (assets or equity), the due diligence period, conditions to closing on the sale, any non-competes to be included in the sale, and whether the negotiation will be exclusive. The letter of intent can be non-binding, binding, or a mixture, depending on the circumstances of the sale. If the non-disclosure of company information is in the letter of intent, that provision should be binding so if the buyer decides not to buy the business, the non-disclosure provision is still in place.

Once the letter of intent is signed, the due diligence period can begin. To make sure you get top dollar for your business, you’ll want to review the items that the buyer will be looking at for their due diligence. The due diligence will vary depending on the type of business. For example, a biotechnology company is likely to have more intellectual property and more due diligence relating to that than a bakery. As a general rule of thumb, here is a checklist of what the buyers will want to review:

Company books and records

  • Articles of Organization/Incorporation and amendments
  • Bylaws/Operating Agreement and amendments
  • Minutes
  • List of shareholders/members and their interests
  • List of states where the company is authorized to do business
  • Any DBAs that the company owns

Financial Information

  • Audited financial statements for the last 3 years
  • A schedule of company debt
  • A schedule of inventory
  • A schedule of accounts receivable
  • A schedule of accounts payable

Real Estate
  • Copies of leases for all company locations to be sold
Intellectual Property
  • A schedule of intellectual property (separated into schedules of patents, trademarks, and copyrights if your business has a significant amount of intellectual property)
  • A schedule of any agreements relating to use or licenses for the intellectual property

Employee benefits
  • Summary plan descriptions of qualified and non-qualified retirement plans
  • A description of worker's compensation claim history
  • A description of unemployment insurance claims history

Any Environmental Issues


  • Federal, state, local, and foreign income tax returns for the last three years
  • Any tax liens

Any material contracts

Any pending or threatened litigation

Whew, you’ve made it through the due diligence period. The buyer didn’t find any major issues so now you’re ready for closing. So what exactly happens at closing? Closing is where all the paperwork and money is exchanged. Both parties should review the paperwork prior to closing, especially if items such as non-competes are involved where there may be negotiation. After closing, seller involvement is dependent on what was discussed as part of the deal. The seller may stay on as an advisor or employee of the company which may involve a separate fee from the purchase price. Now go enjoy your next adventure! For questions, contact our Sioux Falls, Sioux City, or Omaha office today!


Subscribe Our Blog

Posts by Topic

DISCLAIMER: The information in this blog post (“post”) is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. By visiting this website, blog, or post you understand that there is no attorney client relationship between you and the Goosmann Law Firm attorneys and website publisher. No information contained in this post should be construed as legal advice from Goosmann Law Firm, PLC, or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.