What To Expect After Selling Your Company

Colleen Pleasant Kline

So you just sold your company and your immediate plans didn’t involve a trip to Disney World and you are wondering what do you need to do now? The short answer is that it may depend on the agreement you just signed as to what is expected of you in the immediate future.

If you sold all of the assets of the company, odds are that there are a few assets that your company still owns. Typically these are corporate records (your organizational or other formation documents), certain insurance policies, and bank accounts that aren’t transferred, and you may need to figure out where to keep these records and what to do with what is left. You should keep your corporate records either in digital form or somewhere where they are safe from likely damage at least until your entity is dissolved and even for a period after legal dissolution. As an attorney, I often recommend that your legal entity continue to exist for a period following closing as you tie up loose ends or for the period of the brunt of your indemnification obligations. If there is an earn-out or other future contingent payment, you may need to keep a bank account open, and if you are still collecting accounts receivable and paying some outstanding vendors, you need the ability to do so. You may or may not need to change the name of your legal entity, withdraw qualifications from other jurisdictions, and resolve any liabilities or obligations that were not assumed by the buyer. You may also need to notify other service providers such as your insurance broker, health insurance provider, etc., to terminate or wind down in accordance with their terms your contractual relationships with such third parties if you have not done so already. If you have sold the equity in your company, you may not have as many items to do, but you should take stock of what you do have or what might need to be replaced.

In some instances, many of the items that you use in both your personal and professional life may have been transferred with the sale of your company; these can include company cars, computers, and phones. This may mean you need to replace these items (and maybe your cellphone number) if you did not provide for the exclusion of such items as part of the transaction.

Hopefully, your accountant and financial planner were involved early in the sale process to help you maximize value and do any advanced estate planning as part of the sale. If you didn’t, you should contact them and make sure that your accountant has a copy of the transaction documents to assist you with all of the necessary tax filings that would be needed as part of the sale. Also, your financial planner can help you figure out how to invest and grow your funds until you figure out what you want to do next. You also may need your accountant’s assistance in reviewing or preparing any working capital adjustments that are frequently part of any sale. You also want to make certain you have made adequate provisions for any taxes that may be owed as part of the transaction.

If you did not remain as part of the transition team or an employee of the buyer, you likely have certain business restrictive covenants that restrict your ability to form a similar business or engage in similar business activities, including when your next employment or your next investment might be or who you may contact and for what purposes. It is very important that you understand what these restrictive covenants are (ideally before you sign on the dotted line) so that you do not unwittingly find yourself running afoul of these obligations. This is particularly important if you have any earn-out or other contingency payments which could be forfeited in the event of a your breach of these covenants.

If you do have certain obligations for the transition, either as an employee or a consultant, you should make certain you understand what these new obligations are. It is highly likely that the buyer will have different procedures and policies in place with which you will need to familiarize yourself. Becoming an employee again will certainly be an adjustment and knowing what is expected in your new role will be critical to integrating into the new buyer. It also helps to understand what, if any value, you might lose if you decide to leave or terminate any such relationship early.

Like any major life transition, you should realize that it will take time to adjust to your new responsibilities, or lack thereof, and hopefully you can take a moment to enjoy the fact that you have money in the bank and an opportunity to do it all over again.

By Enterprise Legal Expert Colleen Pleasant Kline, Esq., Partner at Miles & Stockbridge P. C.

DISCLAIMER: Opinions and conclusions in this post are solely those of the author unless otherwise indicated. This article is for general information purposes and is not intended to be and should not be taken as legal advice on any particular matter. It is not intended to and does not create any attorney-client relationship. Since legal advice must vary with individual circumstances, do not act or refrain from acting on the basis of this article without consulting professional legal counsel. If you would like additional information on the subject matter of this article, please feel free to contact the author. IRS CIRCULAR 230 NOTICE: Any U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding federal tax penalties or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

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