Businesses transfer ownership all the time. Learn about the business transfer process and all of your legal options here.
Are you planning on selling a business? Don’t let concerns about the business transfer process hold you back! Businesses change hands on a regular basis, and there is a clear set of steps to follow to ensure it is handled the right way.
You should work with business lawyers who understand exactly what your state requires. How can you complete a business transfer and meet all your regulatory obligations? Are there any liens on the assets of the business that need to be addressed? How can you make sure the transfer goes smoothly?
Let’s explore how a business transfer works and how you can find the expert help you need.
How to Sell a Business
Selling a business is a complicated process. The first thing to consider is your regulatory obligations. This is where the expert guidance of business lawyers is essential.
There are different regulations depending on the type of business you are selling. These also vary from state to state. You must also take into consideration any other parties who have an interest in the business and get them on board.
In this article, we’ll focus on selling an LLC. For other types of business transfers, talk with business attorneys who specialize in the relevant branch of business law.
The Finances of Selling a Business
When considering how to sell a business, you have two options. Firstly, the new owner can pay cash in full to settle the transaction.
The second option is owner-financing. The new owner pays in installments over time.
If you are in a partnership or own shares in a business, new shareholders may also buy you out.
It is at this stage that the sale would either be classified as an asset purchase or a stock/member interest buyout.
How to Transfer Business Ownership
Some business owners choose to transfer business ownership to a family member or other party. This may be done as a sale, but it could also take the form of a gift.
If you want to complete this transfer tax-free, then spread it out over a number of years. If the shares you gift each year have a value of less than $15,000 (effective rate as of 2022), the recipient will not have to pay tax on them.
The final option is a lease-purchase agreement. This type of transaction effectively involves leasing the business ownership for a set period. After this, the buyer can either renew the lease, buy the company, or step aside.
How to Transfer My Business: Full Sale Transfer Process
The crucial first question business lawyers will ask before starting a business transfer is: Do you own the LLC outright?
If you do, this is a full sale transfer. The first stage is to consult your Operating Agreement and Certificate of Organization.
If your business does not have an Operating Agreement, it is still possible to complete the business transfer. The default procedures under Massachusetts state law will set out how this must be done.
These documents include clauses that outline how to transfer business ownership. Then you need to define exactly what the buyer is buying.
Some buyers are interested only in buying your business assets. Others may want to purchase the entire business.
The Role of Business Lawyers
Here at Eliopoulos & Eliopoulos PC, we can assist clients negotiate with the buyer. We’ll then draft an initial buy-sell agreement.
Business ownership transfer is a detailed process, and the wording of your buy-sell agreement is crucial. Choose an experienced lawyer to handle this process. They will dot the i’s and cross the t’s, making sure that all assets and liabilities are fully accounted for.
The buy-sell agreement will detail:
- Whether the whole LLC or just the assets are being purchased
- Exactly what is included in the sale
- Sale completion date
- How legal, tax, and financial requirements have been met
When you established your LLC, you had to register the paperwork with the Massachusetts Secretary of the Commonwealth. Now you will need to file a Certificate of Amendment. This will go to the Massachusetts Secretary of the Commonwealth, Corporations Division (SOC).
Business lawyers can prepare the necessary documentation for the LLC amendment. The SOC does not provide a standard form for this purpose. This will set out all of the necessary details to ensure that the SOC office is fully aware of the terms of the amendment.
Your business attorneys can help you to inform other relevant parties. These include the IRS, financial institutions, the registered agent if there is one. They will also help you to update all other interested parties on the change of ownership.
How to Transfer a Share in an LLC
If you are a part-owner of an LLC, the business transfer process is different. Again, the Operating Agreement and Certificate of Organization should set out the process.
Under Massachusetts state law, a part-owner may sell his or her interest to another individual. He or she does not require the consent of the other members. However, in this case, the new party would only have the right to receive profits, losses, etc from the business.
If the new party wants to share in the management of the LLC, all other members must approve the sale of the interest. This is the position of Massachusetts law, but your business’s Operating Agreement may set out a variation to this. In such a case, the Operating Agreement holds precedence.
Again, choose experienced business attorneys to handle the business transfer. The buy/sell agreement for the business ownership transfer will detail exactly what you are selling. It will also explain exactly what rights the new owner has.
Choose Chelmsford, Massachusetts Lawyers You Can Trust for Your Business Transfer!
Whether you’re looking into selling a business or acquiring one, it’s a complicated process. You need to make sure that you’ve satisfied all your legal requirements. Plus, it’s advantageous if you can work cooperatively with all interested parties.
You need to turn to Chelmsford, Massachusetts lawyers you can trust. At Eliopoulos & Eliopoulos, PC, we always strive to exceed our clients’ expectations. We’re ready and waiting to apply our experience in business law to your business transfer.
Contact us today to discuss how we can help your business transfer go smoothly.