In the fast-paced, high-stakes and high-pressure world of startups, financial resources are scarce. Time is of the essence. Product and business development are high priorities. Against this backdrop, legal matters may seem a nuisance and not get the attention they deserve. The reasons for this neglect vary, but often include a lack […]
Exit
You’ve grown your business to the point where you want to cash out or to where you realize other owners are necessary for continued expansion. So what should you do?
First, get your “house in order” and “ducks in a row.” View your business from the perspective of a potential buyer. Reviewing a typical due diligence checklist is a good way to get organized.
Second, you may want to engage an investment banker or business broker to assist you. At a minimum, you should speak to professionals with transactional or offering experience.
Third, before you agree on price, you should consider various deal structures. The following may carry important tax consequences for your exit event:
- Type of entity of seller
- Type of entity of buyer
- Stock or asset sale
- Cash or other consideration (stock such as promissory note)
Understand the structuring alternatives and the tax consequences and negotiate them early!