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Q.What information should I to disclose to a prospective buyer of a business?
A.If your selling a business you will need to disclose a lot of information, some of which is confidential or should be confidential. In the beginning only very basic information about the business should be disclosed to a prospective buyer. If the buyer remains interested, the seller should have the buyer sign a detailed confidentiality agreement or non-disclosure agreement (NDA) tailored to the specific information the seller plans to disclose, or is requested to disclose. A confidentiality agreement, or NDA, can help protect the confidentiality nature of sensitive information be given to a potential buyer. Once a well prepared confidentiality agreement, or NDA, is signed by the buyer, the seller can then provide the buyer with additional financial and operational information so the buyer can make an informed offer. If the buyer's offer to purchase a business is accepted, the seller should be prepared to part with a significant amount of detailed information during the "due diligence" process, including customer lists, employee information, tax information, licenses, permits, etc.
Although your state or county may not require certain disclosures, you do not want the sale reversed and handed back to you. You want to make sure you openly disclose all of the following:
- whether or not a violent crime, fire or robbery has occured at the business?
- if the business has had any health or zoning violations?
- if any accidents or injuries have occurred in the last four years?
- if all payroll taxes, and other taxes, have been reported and paid?
- if there have been any ADA complaints or failed inspections?
- All potential environmental issues?
If you really prefer not to disclose one of the above, consult a local attorney familar with your local state and county laws to determine if you can withhold certain information without impunity.
At the closing, be sure everyone signs a receipt acknowledging receipt of your disclosure statement (Buyer, buyer's attorney, buyer's broker, closing attorney, title company, seller's broker, and seller's attorney). The party making the disclosure should retain the original signed receipt.
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