The wire you receive at closing is not the purchase price
Your closing wire is not the purchase price. See what debt payoffs, escrow, seller notes and tax take out first, and what to fix before the LOI.
Selling the business does not release your guarantees.
Selling the company does not release your personal guaranties. Only the creditor can. Learn which documents to demand before the wire is sent.
Your 1099 contractors are a price problem in diligence
Buyer’s counsel prices 1099 misclassification as a special indemnity and a holdback. See the IRS and DOL tests, and the 120-day fix, before you sign.
Rep and warranty insurance exclusions come back to you.
A reps and warranties policy only covers what it covers. See which exclusions come back to you as uncapped indemnities before you give up the escrow.
A defective claim notice can still cost you the escrow.
Delaware says a defective buyer claim notice can still freeze your escrow for years. See the holding, the drafting fix, and how to answer one.
Part of your earn-out will be taxed as interest
Earn-outs are taxed as installment sales; Sections 483 and 1274 turn part of the deferred price into ordinary interest. See what to fix before signing.
Your post-closing role has limits you did not negotiate.
Your post-closing consulting agreement can be terminated early, and SBA caps how long you may stay. Learn the term, tax and exit traps before you sign.
One owner will speak for all of you after closing.
One owner can settle your true-up, release your escrow, and bind you after closing. See what Delaware enforces, and the clauses to fix before you sign.
The 401(k) must be terminated before closing, not on it.
A 401(k) terminated on the closing date can freeze your employees’ deferrals indefinitely. See which date belongs on the resolution, and why.
Your installment sale defers less tax than you think
Seller notes defer less tax than owners expect: recapture, inventory and pledging bite in year one. See what to model before you sign.