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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!

Recent Blog Posts
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    So you’ve built a quality product that is being heavily consumed and a larger company is now seeking to acquire your startup. This blog post provides tips for avoiding common mistakes made by startup companies during acquisitions. Avoiding Mistakes from the Start of Your Startup: Founder Equity – Hold founder […]

  • A cautionary tale for Exits with Earn-outs

    Selling with an Earn-out? Who is (Really) Buying? The Seventh Circuit Offers A Reminder. The U.S. Court of Appeals for the Seventh Circuit offers good reminders for structuring earn-out agreements. In Northbound Group, Inc., v. Norvax, Inc., et al., No. 14–1651 (July 28, 2015), the Seventh Circuit held that a […]

  • Comparison of Exit Transaction Structure

    Because of taxes, the type of entity you have selected for your company may substantially impact the amount of money shareholders take home after sale of the company. The following is a cheat sheet to help you identify the pros and cons of each entity type in light of these […]

  • Why Flow-Through Entities May be Better for an Exit

    Entrepreneurs are often advised to organize their new business as a corporation due to certain perceived advantages. Chief among the perceived advantages is that the corporate form primes the company for an eventual public offering, a tax-free acquisition by a public company, or an investment by a venture capital firm.[1] However, […]