When you’ve worked hard to build a business, being able to sell can feel like the light at the end of the tunnel. All of your careful planning, late nights, and weekend hours have finally paid off, and you get to pass the torch on to someone else.
Unfortunately, selling a business isn’t as easy as a simple handshake deal over a cup of coffee. It’s important to carefully follow the laws and protect yourself with an airtight sale contract, among other things. Here’s a breakdown of what to know about the legal landscape of selling a business in Dallas.
Federal Laws To Consider
Following all the applicable laws when selling a company helps business leaders and their organizations stay out of trouble.
Some of the federal laws to be aware of include the following:
- Securities Act of 1933: This act regulates the sale and exchange of securities and is important for any business sale that involves transferring stocks.
- Hart-Scott-Rodino Antitrust Improvements Act (HSR Act): This act is intended to prevent monopolies or trusts. If you are selling your business to a large business in the same field, you may need to comply with this act.
- Internal Revenue Code (IRC): The IRC outlines tax requirements for different forms of income, including the income of selling a business.
Of course, there are many more laws that you should consider depending on what sector your business operates in. To make sure your sale complies with all necessary laws, it’s generally best to consult a business lawyer who has navigated a successful sale before.
State Laws To Consider
On top of laws enforced by the federal government, there are also laws unique to Texas. These include the following:
- Texas Business Organizations Code (BOC): This law regulates how all businesses are operated within the state of Texas. Depending on the structure of your business, there may be special provisions in this law to consider.
- Texas Deceptive Trade Practices Act (DTPA): Originally passed on May 21, 1973, this law requires sellers to be honest and upfront about the asset that they are selling. Provide potential buyers with accurate and current financial documents and operating information. The Deceptive Trade Practices Act is enforced by the Texas Attorney General.
- Texas Property Code: If your sale involves selling physical property (“real property”) and assets, follow the Texas property code.
- Texas Real Estate Law: Similarly to the above, if your sale involves the transfer of real estate, double-check that you’re abiding by the applicable Texas real estate laws.
- Texas Right of First Refusal (Business Buy-Sell Agreements): If your business has multiple stockholders, you may be required to first offer your stocks to other shareholders. A right of first refusal (ROFR) allows them to match or not to match an outside offer before you can sell ownership to an outside party.
The Importance of Business Valuation
When you’re looking to make a sale, it’s easy to be hopeful that all parties involved will be respectful and easy to work with. However, this isn’t always the case. In some cases, the buyer may not agree with the sale price, which is an issue that can quickly become a bottleneck in the sales process.
You may be wondering, “What is the first step it takes to sell my business in Dallas, TX?” Our advice is to first consult a business valuation firm. That way, you and a potential buyer can move forward with a clear number that was calculated by an outside party.
What To Include in a Purchase Agreement
It’s generally best to consult a lawyer when it comes to drafting any kind of legal document, especially a purchase agreement. Without an airtight agreement, you may be setting yourself up for headaches down the road.
That said, there are some general items that should be in a business purchase agreement. These include the following:
- Parties involved
- Purchase price
- Warranties
- Liabilities
- Physical assets (equipment, real estate, warehouses, and more.)
- Intangible assets (goodwill, trademarks, intellectual property, and more.)
- Payment terms
- Closing dates
Of course, your purchase agreement may look different depending on certain factors. Consult with an attorney to check that your agreement fits your unique situation.
The Bottom Line
For many small business owners, a business isn’t just a business—it’s a representation of dreams achieved, time spent, and lots of hard work. Selling a business is a deeply personal (often emotional) choice, but it’s also a legal, analytical one.
Lastly, review all the federal and state laws that apply to your business, the sale, and your company’s value. These guidelines can be just the beginning—work with a practiced business attorney to ensure you’re complying with the law.