Name Sale

Saturday, July 26th, 2008 at 8:01 pm

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Name Sale

What is the name of this legal document re sale of small businesses?

If you co-own a small business and decide to sell your half, either to the other owner or a third party, what is the name of the document you need to sign? What is the process you need to go through in order to do this?

The document can be called an "assignment" or a "bill of sale." If real property is involved, you will also have to sign a deed.

As for the process, that depends upon whether you are selling to a co-owner or a third party. If you are a co-owner selling to the other co-owner, you probably need nothing more than an agreement to sell for a specified price. Since the parties are equally knowledgeable about the business, there would typically be no representations or warranties. These sales are ordinarily "as is," and the bill of sale will so state.

If you are selling to a stranger, the process is a bit more complicated. First, you have to find the stranger. You might place an add in the paper or online, but you might also want to hire a business opportunity broker -- a person who brokers sales of businesses. There will, of course, be a commission involved, which you will have to negotiate. Once you find, a prospective buyer, you will have to negotiate a purchase and sale agreement. Unlike the sale to a co-owner, a third party buyer knows nothing about the business, and will typically want to look at your books to find out how the business is doing -- also tax returns. Any purchase will be subject to the buyer's approval of those documents. Also, the buyer will typically want written representations and warranties regarding the condition of the equipment and the financial history of the business. Whether you are willing to give those representations and warranties is up to you, but it will be more difficult to sell if you refuse. Once the contract is negotiated, the sale price is paid and the bill of sale or assignment is executed.

Also, of course, the sale of some businesses requires third party approvals. For example, if the premises are leased, the landlord will typically have to approve the assignment of your lease to the buyer. And if you have government licenses (like a liquor license), the approval of the licensing body will be necessary to transfer the license to the buyer.