This article are provided for information purposes only, and are not intended as legal advice.

Selling a business checklist

March 29th, 2010

When you sell a business, what do you need to do before you list your business for sale.  Here is a partial list of things that you need in order to be ready to list your business for sale:


  • last three years financial statements, hopefully prepared by an external accountant
  • internal financial statements from the last year end until present
  • last years tax returns
  • Notice of Assessment confirming that the information on the tax returns you provided above were the same that were filed with the appropriate government authorities, in Canada, Canada Revenue Agency (CRA) and the US Internal Revenue Service (IRS)
  • copy of lease
  • copy of any equipment or other types of leases, long term obligations
  • list of fixed assets that are being sold
  • confirmation if you are selling assets of shares of your company
  • list of staff by position, not by name and possibly length of time that they were employed by the company
  • sales to top ten customers (no names to be revealed, just say customer 1, sales are, customer 2, sales are etc)  this just shows how economically dependent you are or are not on your largest customers
  • purchases from your top ten suppliers, this again gives an idea how dependent you are on your suppliers
  • normalized income – you start with the net income as reported on your year end financial statements and then add back taxes, interest, depreciation, amortization, personal expenses which will not continue after you have sold the business.  Personal expenses can include family members on the payroll who are not working, travel etc which you have put through the business which are not required by the firm.  You will need to substantiate any claims that you make that they need to be added back on the statement of normalized earnings.  In addition, you will have to normalize the owners salary, reflect how much was required to pay a person who would be in charge of a business your size.  If you are taking out a large salary, part of the salary may relate to a return of capital rather than for the work performed.  For example, if the owner had a salary of $200,000 and you need to pay a person $100,000 to run the business, you would add back $100,000 to the normalized earnings because $100,000 of payment relates to being the owner and not for running the company.  If on the other hand the owner took out only $20,000 and it costs $100,000 for someone to run the business, you need to subtract an additional $80,000 from normalized earnings.  Many owners believe that they do not need to factor their salary into the business, everything that they take out relates to being an owner.  If the owner if in fact working in the business, this is a false statement and part of their compensation relates to salary.

To be continued tomorrow

Filed under: Selling a business — Gary Landa @ 9:04 am

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