Selling a Business During Lawsuit

Can you sell a business during a lawsuit?

Can you sell your business while facing a lawsuit? While it may not be an easy feat, it is possible. However, you must navigate the challenges that come with it. In this article, we will explore the key issues you need to address if you find yourself in this situation.

Issue #1: Disclosure of litigation details to your buyers

As a seller, you have an obligation to inform potential buyers about any ongoing lawsuits. Whether your business is directly involved or if the lawsuit pertains to you personally, transparency is crucial. Failure to disclose this information can lead to legal complications and post-closing disputes.

Issue #2: Anticipation of a lower price offering

It is essential to consider the impact of a lawsuit on the valuation of your business. In some cases, lawsuits can give investors leverage to drive down the price. If time allows, it is advisable to settle the lawsuit before proceeding with the sale. However, if immediate retirement or other pressing circumstances dictate, you may have to accept a lower offer.

Issue #3: Understanding your seller’s responsibilities

To ensure a smooth selling experience, it is important to be aware of your responsibilities as a seller. This includes acting in good faith, providing accurate information, and preparing all necessary documentation. Any previous legal history and interactions with the government should be disclosed to potential buyers. Consider working with a professional M&A broker to help navigate these complexities.

Issue #4: Buyer due diligence

Buyers have a responsibility to conduct due diligence on the businesses they are interested in acquiring. It is crucial for sellers to be upfront about any pending lawsuits as diligent buyers will uncover hidden information. Failing to disclose critical details can damage the buyer-seller relationship.

Issue #5: Considering the impact on business

A lawsuit can have various detrimental effects on a business, from financial losses to tarnished reputation. It is important to be realistic about the potential consequences and address the lawsuit appropriately. Engage legal counsel to protect your interests and minimize the impact on the business.

Surround yourself with the right team

While selling a business during a lawsuit may present challenges, it is not an insurmountable task. By assembling a team of experienced professionals, including brokers, attorneys, and accountants, you can navigate the complexities and increase your chances of a successful sale. Sun Acquisitions, a seasoned brokerage firm, can provide valuable support throughout the process.

For those in Chicago looking to sell their businesses, Sun Acquisitions brokers are ready to assist you. Contact us today for expert guidance.

Looking for more insight on selling a business? Check out these resources:

Disclaimer: The information provided in this article is for informational purposes only and should not replace professional legal, financial, or taxation advice.

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