New Jersey Business Brokers: Article About The Cost Of Closing Your Deal
You worked hard to build a salable business and expect to realize a tidy profit from the sale. Your closing costs, however, will make a difference in the amount of money you will walk away with. First, in most cases, you must leave an agreed upon amount of working capital in the business coffers. Settling outstanding debts, paying for professional services, the taxes attached to the deal and miscellaneous expenses also reduce the proceeds you will receive from the transaction. Ask your New Jersey business brokers to estimate the closing costs for you before putting your company on the market.
In general, when you sell your business, you can expect to keep the cash and receivables on your books. However, the buyer needs operating capital while getting up to speed after closing. Buyers often request that sellers leave money in the business for this purpose. Typically, buyers request a sum equal to three times the business's monthly expenses.
If you have open accounts at the time of closing, the closing agent deducts those amounts from the sales proceeds. You must settle any lines of credit you opened for business purposes at this time too. Expect deductions for prorated property taxes or licenses at closing as well.
The business brokers from Selby Associates of New Jersey would be happy to answer any question you have about business mergers or business advisory services.
However, if you have already paid in advance for such expenses, you may get a refund once the closing documents are recorded.
Professional fees typically constitute a major part of your closing expenses. If you enlisted legal assistance or accountancy services to help in completing your business sale, you must subtract those costs from your total closing balance. Unless otherwise negotiated, the buyer is responsible for those professional fees he or she incurred. Your business broker's commission comes out of your sale proceeds at closing.
Federal and state taxes also reduce the amount you realize from selling your company. You may not have to pay them immediately upon closing but must set aside enough capital to cover them. Ask your accountant how to best structure the sale to reduce the associated taxes.
Miscellaneous costs may include utility payments, lien searches and recording fees. It it is standard prior to completing a business sale to verify that no legal claims are attached to your assets. Recording fees consist of the costs of legally entering certain documents to validate your sale. Post closing adjustments may also be a factor in the actual proceeds from your sale.
As long as you are aware of the discrepancy between the gross proceeds from your company sale and the amount you can expect to net, you will encounter few surprises at the closing. When you consider low offers from prospective buyers, be sure to figure your projected closing costs into the equation.