When the Business Must Be Sold Outside the Family: Key Negotiating and Tax Issues

When the Business Must Be Sold Outside the Family:Northeastern University
Key Negotiating and Tax Issues

Family Business Quarterly
by Stephen Minson and Gary Hayes

As accountants for closely held businesses, we are normally concerned with the transition of a family business to the next generation. In some cases, however, it may be impossible for the business to be passed on to the next generation. For example, the owner of a closely held business may not have children who are interested or qualified to run the business. In this situation, the owner may have no choice but to plan for the sale of the business.

In this event, a number of important issues should be considered. Once a potential buyer is identified, there is normally a period for due diligence, during which the buyer and seller exchange financial and legal information about the companies. Before this exchange of information, the parties may sign a letter of intent. The letter of intent may require that all information exchanged will remain confidential, and the parties agree not to entertain offers from other parties during the due diligence period. More…