Those who wish to sell their businesses cannot simply hand over the keys, collect the cash, and walk away. A business sale is a big transaction and it requires a veritable trove of documents to match. Below, Business Brokers of America explains the documents needed to sell a business in Utah and why they matter.
Documents Needed To Sell a Business in Utah
Those who are planning to offload a business will need a valuation report, letter of intent, and financial statements, among other documents, to get the ball rolling.
Tax Returns and Financial Statements
Before selling a business, owners should collect their tax returns for the past several years. Additionally, they should gather cash flow statements, income statements and balance sheets.
These statements are essential because they show a business’s profits, losses, and revenue. Most buyers will want to see at least three years of statements before they sign on the dotted line.
Business Valuation Report
A business valuation report shows the value of a business based on its financial data and market conditions, so it’s one of the most important documents needed to sell a business. Because valuation reports are complex documents, they are not something that business owners should prepare themselves.
The two most common types of valuation are the income approach and the market approach. The income approach shows a business’s ability to generate income over a period of time while the market approach assigns a value based on other recently sold businesses.
Non-Disclosure Agreement (NDA)
An NDA is essential because it prohibits buyers from sharing confidential information discussed during the sale process. Without one, buyers could share or sell sensitive data about customers, employees, proprietary formulas and financial details.
NDAs are legally binding. If the buyer violates the NDA’s terms, they can be held liable for damages. Business brokers in Utah can explain how to create an NDA if a seller needs help creating one.
Letter of Intent (LOI) and Purchase Agreement
The letter of intent is one of the most important documents needed to sell a business in Utah. It’s essentially a statement that says both parties would like to move forward. However, it isn’t legally binding. The letter of intent should include the purchase price, payment terms, proposed timelines, and any warranties or liabilities.
The purchase agreement is the next step after drafting a letter of intent. It’s similar to a letter of intent but legally binding.
Due Diligence Documents
After signing a purchase agreement, the seller will need to do their due diligence by providing an array of important documents to the buyer. Not providing the right documents can lead to legal disputes and the buyer may back out of the sale altogether.
Common due diligence documents include contracts, permits, licenses, and equipment or property leases.
Learn More About the Documents Needed To Sell a Business in Utah
There are so many documents needed to sell a business in Utah that it’s easy for owners to feel like they’re stumbling around a maze with no exit but Business Brokers of America is here to help. The company connects business sellers with buyers, handles negotiations, and can answer questions about the best time to sell a business.
Call (801) 935-8919 to get started.
