4 Questions to Ask a Lawyer Before Selling Your Business

To help you out in this regard, keep reading for 4 important questions to ask a lawyer before you sell a business.

Ask a Lawyer Before Selling Your Business

Selling a business is often a time of great excitement. It represents turning the page on a chapter of your life and moving on to new endeavors. In many cases, this is sweetened by a nice little profit and more free time to pursue your passions. Nonetheless, there are many important legal considerations that need to be accounted for prior to selling a business. To help you out in this regard, keep reading for 4 important questions to ask a lawyer before you sell a business.

4 Questions to Ask a Lawyer Before Selling Your Business

What Documents Do I Need to Have in Place?

Ask a Lawyer Before Selling Your Business
Ask a Lawyer Before Selling Your Business

There is a mountain of legal documents that need to be accounted for before your business can change hands. That is not an exaggeration. Some important documents to start with include:

  • Current lease agreement
  • Existing vendor/client contracts
  • Business’ professional certificates
  • Enterprise insurance policies
  • Non-disclosure and confidentiality agreements
  • Letter of intent
  • Offer to purchase agreement

Again, these are just some of the pieces of the puzzle to have in place prior to closing. It is important to consult with your legal professional to see if there are any additional local or state codes particular to your business that need to be produced, signed, or filed before the business can be sold.

Read More: Choosing a Legal Team for Your Business: What to Consider

What Are My Obligations to Employees?

Ask a Lawyer Before Selling Your Business
Questions to Ask a Lawyer Before Selling Your Business

One of the attractive aspects of a for-sale business is when buyers see a ready-made team that they can count on for seamless revenue production once the business changes hands.

However, it is important to remember that selling a business is a time of great uncertainty for many employees. Even if you are above-board with them regarding the sale and what their roles may look like under new ownership, some professionals may use the sale as a logical exit point to pursue their own career transition.

In some cases, this is not as simple as writing them a letter of recommendation and wishing them well on the next chapter. Some employee agreements are structured to trigger buyouts or severance packages in the event that the business is sold.

Therefore, it is crucial that you review all of your employee contracts with a lawyer to see who is responsible for this compensation. If it is your responsibility to compensate your departing employees accordingly, it can take a serious chunk out of the profit you receive from the business sale.

Am I Free and Clear of Liability?


Although it is nobody’s favorite topic to discuss, business owners need to have a heightened awareness of potential lawsuits and liability. While selling your business may make it feel like you are washing your hands of this concern, the reality is not always so simple. A few of the many legal concerns to keep in mind include:

  • Is there any ongoing litigation in which I will continue to be involved after the sale is finalized?
  • Are there any outstanding penalties or fees related to the business that I could be sued for not paying?
  • Are there any safety or ADA concerns that I was not transparent about during the sale process?
  • Am I leasing any equipment that was not included as part of the sale so that the new owners can continue operations?
  • Do I own any patents to products that will continue to be produced by the business under new ownership?

At the end of the day, every business transaction is unique, and there is no limit to what you could potentially be held liable for, even after the sale of your business closes. Therefore, it is paramount that you be transparent with your lawyer and give them the lay of the land so that you best know what to expect moving forward.

What Are the Tax Implications?

Ask a Lawyer Before Selling Your Business
Questions to Ask a Lawyer Before Selling Your Business

In most cases, selling a business will trigger capital gains (or loss) tax. This means that you will only be assessed tax on the difference between what you sold the business for and what you actually invested in the business.

While capital gains tax rates are generally favorable, it can still result in an eye-popping boost in your tax liability if your capital gain was significant. Therefore, while receiving a cash offer for your business has many advantages, it could result in a major increase in tax liability when receiving all of that money in one lump sum.

To help ease the tax burden, many business owners prefer setting up an installment plan when selling their business. If a single payment is received in the year following the year of sale, then it qualifies as an installment sale. Just remember that selling your business on an installment plan poses the risk of the buyer defaulting in time, so you will have to weigh the benefits of lighter immediate tax liability over this increased risk.

Other ways to structure the sale of your business include filing your business as an S-corporation, selling to your employees, and reinvesting capital gains into an Opportunity Zone. Be sure to weigh the pros and cons with your legal professional to determine what your tax liability will be under each method of sale.

Consult With a Legal Expert to Ensure a Smooth Business Sale

Without proper planning and preparation, emergent legal issues can put a damper on your business sale. To help make sure that you have all boxes checked, contact a legal professional today, and rest assured that nothing catches you by surprise when your business changes hands. We hope these questions to ask a lawyer before selling your business will help you.