Sometimes when you want to make a profit, you have to sell your business. Be it a small scale merger or a big scale acquisition, it all comes down to a certain legal process that every company must follow. It is not as simple as just writing a check and handing over the company to the buyer.
There are certain legal steps to closing the sale of any business which ensures a successful transaction for everyone involved. Below are 6 legal steps to selling an enterprise, which can be easily handled with the help of the right business law firm in Lithuania.
Declaration of intentions
When you find the best buyer, the first step is to form a Letter of Intent. This legal document summarizes all the conditions and terms of the transaction. This includes the purchase price, due diligence terms, deposit amount and such.
The document is signed by both parties and guarantees that the seller will not advertise their business for sale while the negotiations are being conducted. The buyer will also have to pay a deposit to the seller during these negotiations – it ensures that only serious buyers that have money are trying to come to a deal.
Due diligence
This is when the buyer does their own research into all aspects of the seller‘s company, usually with the help of a business law firm, in Lithuania or another country. All customer records, sales reports, financial records, profit & loss statements, contracts, loans and so on are inspected – this will help them decide whether they want to buy the business or not.
It‘s important for the buyer to do their own investigation. If they purchase the business and then sue the seller claiming that the client or profit numbers don‘t match, this due diligence will protect the seller in court. The buyer cannot claim that they didn‘t know certain information, as long as they are provided with accurate documents during the due diligence process.
Purchase agreement
If the buyer is still interested in the company after performing their due diligence, a purchase agreement needs to be created to officially start the transaction – it is crucial to consult a trusted business law firm. In Lithuania and other regions, an experienced attorney or a group usually create these agreements along with the clauses that protect the business interests. It is a binding contract that will obligate the purchaser to buy the business for the price and terms agreed upon in the document.
Payment handling
It is especially important to find out the method of payment first. The best method is by paying with cash as it ensures a smooth transaction, but that is quite rare. Most of the time, buyers will try to obtain financing from a bank.
Another way is for them to ask the seller to give them a seller financing deal. Here, the buyer agrees to receive monthly payments from the buyer in exchange for letting them own the company. It is strongly advised to consult an experienced attorney from a business law firm in Lithuania, as it is not an ideal payment method. If the buyer defaults whilst making these payments, the seller will have to go through legal procedures to reclaim ownership of the business.
Attention on state laws
Every country has specific laws that regulate the sale and purchase of companies. These laws outline which steps both parties have to take prior to closing the sale. If these laws are broken, the seller will face fines or a termination of the sale. Consulting lawyers is the best option in this case as they are well versed in such matters.
Transfer ownership
When everything is done, the last step is to close the deal and transfer ownership. This includes signing plenty of legal, binding documents. Consult a trusted business law firm in Lithuania or another country if you have further questions about the transfer arise.
These are the 6 legal steps to selling a business, which will ensure a smooth, less problematic process. It is in the best interest of the seller of any company to closely follow these procedures in order to get the most of the deal and avoid any possible legal trouble.
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