Selling a Business

Buyers should sign a nondisclosure agreement before they receive financial statements or even the business's name. Most sellers share information in stages and hold back customer lists, employee details and contracts until a letter of intent is signed. Employees and key customers are usually told close to closing, under a plan the buyer and seller agree on.

Texas courts generally enforce a non-compete given as part of a business sale when its length, geographic area and scope of activity are reasonable. Because the buyer is paying for goodwill, these covenants are often broader than an employee non-compete. The negotiation is usually about how long it lasts, where it applies and what it covers.

Sellers often prefer to sell the company's stock or membership interests, because the liabilities go with the company and the tax result can be better. Most buyers prefer to buy assets. The right answer for a given deal depends on taxes, licenses, contracts and the buyer's financing, so we work through it with your CPA early.

Disclosure schedules list exceptions to the statements you make about the business in the purchase agreement, such as a pending dispute, an expired permit or a contract that needs consent to transfer. A buyer generally can't bring a claim over something that was properly disclosed, so complete schedules are one of a seller's strongest protections.