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| 9 Items That Should be in Your Closing Checklist |
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A Checklist: Items Required for ClosingReview documents required to be provided by the seller Some states require specific documents (consult with your attorney), but common items that the seller will provide prior to closing are: certificate of good standing, evidence of clear titles, releases from certain creditors, lease assignments, etc. Promissory Note and UCC Filing If the seller is holding a promissory note, then both parties should review the final draft of this document well before closing. Along with the promissory note, the parties should prepare a UCC-1 filing to insure that there is a lien in place along with the promissory note. Lease Assignment In most cases a lease is involved in transactions. If this is the case, the lease must either be assigned to the new buyer or a new lease must be entered into. In all likelihood in the case of an assignment, the landlord will need to agree to the assignment. This document (Assignment of Lease) must be finalized for the closing. Franchise Assignment If the business is a franchise, it is quite likely that the franchisor will have to agree to assign the franchisee's rights to the new buyer. The franchisor should be approached early in the process in order to make this a smooth transition. Covenant Not to Compete Most buyers will want the seller to enter into a non-compete agreement. As there is no "standard" for the terms and conditions of the non-compete, the parties should work out the details and finalize this document prior to closing. Bulk Sale Agreement / Notification A bulk sale is defined as the sale of the majority of a business assets outside of the ordinary course of business. In all likelihood, if you are conducting an asset sale, then this falls under bulk sales laws. Typically a seller must notify the state - and creditors - of its intent to liquidate its assets. Consult your attorney for state-specific requirements. There is, however, typically a notification period required prior to a closing. Purchase Price Adjustment With most sales, the purchase price is going to have a static component, plus items that will vary at closing (i.e. inventory, AR/AP if included, rent and utilities, etc). These items are adjusted at closing to account for current levels. Bill of Sale The Bill of Sale is the "receipt" for the sale of the business and / or its assets. This document is a key document in the closing. |
Although every sale is different, there are a number of common items that have to be completed in all business transactions. Consult your broker and attorney regarding your specific situation, but we have provided the following "Checklist to buy a business" starting point to get you thinking about the tasks required for a closing.