Many legal documents are needed to sell a business in Florida, but there are five that are the core of any sale and should be focused on carefully. These documents will drum up interest and protect your business from buyers who have ill intentions:
- Your Investment Banker’s Engagement Letter
- The Teaser
- A Non-disclosure Agreement (NDA)
- A Letter of Intent (LOI)
- The Purchase Agreement
Table of Contents
5 Essential Legal Documents for Selling a Business in Florida:
1. Your Investment Banker’s Engagement Letter
A business engagement letter is an agreement document that describes the business relationship between you (the seller) and your chosen advisor. When working with an advisor such as an investment banker, you will need one to detail the scope of the agreement, its terms and its costs. The engagement letter will allow you and the advisor to have a clear understanding of what they need to do. It should include:- A fee agreement for the advisor’s services: including details on deposit or retainer and success fee.
- Term length: How long the agreement is effective for.
- Exclusivity clauses: This may be requested by your advisor and should not be a cause for shock. They are a sign of loyalty and are common when searching for investment bankers.
- Termination Clause: Used to detail the steps required to end the agreement, such as a written notice.
- Tail: The tail is the period after the end of the engagement when the advisor can still collect fees if there’s a transaction. This is usually used when a seller uses a third party that their advisor recommended.
2. The Teaser
The most important legal document needed to sell a business in Florida is the ‘Teaser’. This is a document that briefly summarizes the proposed investment opportunity for potential buyers of your business. It is very important to have this written and reviewed by an experienced business lawyer. As the name suggests, the goal is to tease an idea about the business but not reveal everything. In many cases, it may not even reveal the business name. It’s a great way of getting parties interested without showing all your cards at once. The teaser should include:- Line of business
- Major products
- Industry
- Key customers or clients
- Past revenues
- Projected future revenues.
- It should be short.
- It should be professional.
- It should not reveal everything.
3. A Non-Disclosure Agreement (NDA)
Non-Disclosure Agreements (NDAs) are legally binding contracts that ensure potential buyers keep information confidential when you sell a business in Florida. This will secure your business’s trade secrets and sensitive information from leaking out. Without one, a potential buyer could simply have a look into your business operation and steal your tricks and secrets. By using a business contract lawyer to carefully draft the NDA, it will protect the following from being used or leaked:- Customer and client information (including direct communications with them).
- Financial Information.
- Intellectual property.
- Marketing information.
- Operating information.
- Explain the duration of the agreement.
- State what information is confidential.
- What will happen if the agreement is broken?
- What should happen to information upon the end of the agreement?
4. A Letter of Intent (LOI)
A letter of intent (LOI) will be provided to you (the seller) by the buyer and protect all parties when you sell a business in Florida. It will outline their proposed structure and terms for purchasing your business. This is a very good indicator of how serious, suitable and interested a buyer is. They are similar to term sheets but are formatted as letters. LOIs are usually drafted and signed during negotiations and cover:- Deal’s structure (such as a merge or joint venture)
- The consideration
- The desired timeframe
- Closing conditions
- The requirements for due diligence
5. The Purchase Agreement
Purchase agreements are legally binding contracts between the buyer and seller. At this point, it’s imperative that you work with a Florida business lawyer to avoid drama and damage to your business when you sell a business in Florida. After all the long negotiations have occurred, purchase agreements finalize the terms and conditions of the sale. Don’t make the mistake of using a template purchase agreement; every sale is different and you’ll need one tailor-made for your business. Purchase agreements include:- Identification of what the purchase includes: Such as the business ownership and its assets
- The exchange price of the transaction: Including details of what sale price is required as an upfront deposit, and how the remaining balance will be paid.
- The acknowledgment of due diligence: Buyers may be required to state their completion of due diligence, which may correspond to additional deposits or payments.
- Conditions for Sale: The conditions of the sale must be met for the sale to be legally binding; if not, it will be a breach of contract. This is a chance for both parties to reduce the risk of the deal falling through and protect the business. Some conditions may detail the prospect of litigation, insurance and warranties.
- Damages and Remedies: This section may be included to explain what should happen if assets or the business take damage before the sale is concluded.
What Other Legal Documents Are Needed to Sell a Business in Florida?
There is no generic number of legal documents required to sell a business in Florida, as each industry comes with different demands. Please feel free to contact our Florida business sales lawyers who can ensure you don’t miss a single critical document during the sale process. However, you can also expect to need:- Promissory notes
- Security agreements
- Appraisals
- Annual minutes and filings
- Business licenses
- 2 Tax returns
- Financial statements
- Property leases
- Formation documents
- Subcontractor agreements
- Supplier and Distributor Contracts
- Insurance policies
- And many more
