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Business Sale Question

Question from one of our subscribers:

I have a Bricks n Mortar business up for sale. No one has the cash available to buy. I have an interested party that has 50% of the asking price. He’s suggesting that we sell to him on a 50% up front and with the remaining 50% payable over the next 5 years. The good side to this coin is that we also own the property that he’d be renting and we could add the outstanding payments onto the annual rental costs. The business has valuable assets, so what would be
the best way to set up the sales contract – before I go ask my Solicitor and accountants for advice, I thought I’d ask here (actually – they are both on holidays this week, so I can’t call them anyway)

The initial problems I foresee is the assets. Obviously, we can’t transfer the ownership until the 100% has been made in 5 years time. We don’t want the buyer to run off with the assets after just 6 months etc. After 5 years and the final payment, we could then transfer 100% ownership. There’s the ‘problem’ with the assets during this period. Who owns them? Who’s responsible for maintenance and repairs etc ? I’m thinking along the lines of a lease rental type contract, where the title isn’t transferred until payments are completed. Obviously my accountant/solicitor can sort out the legalities, but can any of you foresee other problems which may occur ?

Answer:

Hi!

Other than a 24-hour service to guard your assets, I think you should get the paperwork right. I’d be sure and include reasonable interest on the “loan” for the second 50%, as well.

Hope this helps!

 

 
 
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