• Luke Middendorf

Fundamental Documents You'll Need For The Sale Of Your Business



Fundamental Documents You'll Need For The Sale Of Your Business


An essential step in selling your business is gathering comprehensive and organized documentation. Having these documents prepared and ready can increase the validity of your asking price and help to move the sales process forward more smoothly.


Additionally, these documents will be used at the beginning stages to help determine the value of your business, and they may be requested throughout the due diligence process. Here are a few key documents to gather as you prepare to sell your business:


Types of documents

Financial Documents


One of the most important steps to creating an exit plan for the sale of your business is to possess organized and detailed financial records. Not only do clear and concise financial documents back up your asking price, but these documents also give you a chance to identify shortcomings and areas of potential growth.


Additionally, financial documents are used when assessing the value of your business. Should you choose to work with a business broker, they will require specific documents to complete the assessment of value, including:


  • The last three years of tax returns

  • Current balance sheet

  • Income Statement (YTD)

  • Cash flow Statement (YTD)


This, however, is a partial list of financial records you should consider prepping in the early stages of getting your business ready to sell. Other financial documents to collect include credit agreements and outstanding loans, to name a few.


Professionally audited and prepared financial statements can help prove your numbers' soundness and potentially increase your asking price. A CPA can provide the necessary guidance for this part of the process.



Legal Documents


Legal documents are reviewed during the due diligence phase of selling your business. Potential buyers and their advisors will want to understand your business’ legal obligations and responsibilities found in the language of your legal documents. To prepare yourself for this process, be sure to have accurate records of the following:


  • Lease agreements. This can include building and equipment leases that a potential buyer would likely assume at the sale of your business.

  • Real Estate records. If you own your property, you will need to transfer your ownership at the sale of your business.

  • Business registration documents. You will need to provide information on how your business is registered and if you have any government licenses or permits that may need to be transferred to a buyer.

  • Intellectual property rights. This can include any copyrights, patents, domain names, logos, trademarks, etc.

  • List of stockholders/shareholders (if there are any).


Business Operation Documents


Business documents are an integral part of detailing how your business operates. This is vital information to potential buyers as it helps them see the inner workings of your business. Here are a few key business records to include:


  • Business plan. This should include your company’s objectives and goals and help potential buyers further understand the operations of your business.

  • Existing customer list. An organized list of existing customers is a significant asset to potential buyers as this allows them to use your list of customers instead of starting from scratch.

  • Sales Playbook. A detailed sales playbook should describe your sales process and marketing plan.

  • Supplier information and contracts. A potential buyer will want to know about your current suppliers and where they can source the materials needed.


HR/employee documents


Employee contracts and company culture become part of the sale. Since a potential buyer will likely want to retain some or all of your employees, they must understand the employment environment. Here are a few key documents to have prepared:


  • Employee information. Include a list of current employees, their hire date, and their salary.

  • Employment contracts. A potential buyer will want to know about any existing employee contracts that will need to be maintained.

  • An employee handbook. This will give a detailed look at the expectations of your current employees and your company culture.

  • Agreements with payroll companies. Be sure to include any agreements with your current payroll management service providers.

  • Employee benefit plans. A potential buyer will want to know your current benefits plan and what needs to be altered and upheld.


Conclusion to Fundamental Documents You'll Need For The Sale Of Your Business


Comprehensive, organized record keeping is a critical part of selling your business. For help with this process, you can start by contacting us for a free, no obligation assessment of value.

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