If you’ve reached the point where you’d like to sell your business, odds are you’ll want to engage a business broker to help you through the process. The relationship between a Business Broker and seller is a key element to getting a business or restaurant sold. As a seller, a broker can help you streamline everything from pricing your business to marketing it to buyers.
The relationship between a seller and a Business Broker should be honest and open, with ALL negative information provided to the Broker upfront. Founder of EATS Restaurant Brokers Dominique Maddox says, “the worst feeling is to have a seller not disclose negative information on the listing and you find out later in the process”.
The act of withholding information from a Business Broker can decrease the chances of a business getting sold. Business Brokers are consultants with a job of keeping a deal together, this becomes increasingly difficult if they don’t have all the details of the business.
EATS Restaurant Brokers provides 3 things a Business Broker should know about your business.
Do the tax returns match the copy the IRS has on file?
When a buyer goes to a bank and provides Tax Returns provided by the seller, the bank will request tax returns directly from the IRS to confirm they match. Form 4506-T is an Internal Revenue Service (IRS) document that is used to retrieve past tax transcripts that are on file with the IRS. The document must be signed and dated by the taxpayer, thus giving third-party permission to retrieve the taxpayer’s data.
This is extremely important because if a seller has provided false tax returns or filed an amendment on his/her tax returns the Broker needs to know this information. Yes, as a Restaurant Broker I’ve had sellers provide false tax returns to a buyer and it was uncovered once the form 4506-T was signed.
Do you own the equipment?
Landlord these days when a tenant defaults on the rent they will evict the tenant and keep the equipment. This process makes it’s easier to lease the space to a new tenant. Savvy buyers can get a fully equipped restaurant to lease to convert to a new concept. This works well when you are opening but when it’s time to sell, what do you have to sellAn experienced Business Broker will have a seller provide an asset list to include only items owned by the seller. This makes a big difference in the potential list price. I’ve experienced sellers trying to sell a restaurant, but they don’t own the equipment, these deals rarely close.
UCC liens on the business?
UCC filing, also known as a UCC lien or a UCC-1, is a financing statement that lenders can file against your business with your secretary of state. ). This form is filed in order to “perfect” a creditor’s security interest by giving public notice that there is a right to take possession of and sell certain assets for repayment of a specific debt with a certain priority
Liens can be placed on business equipment, a vehicle, property, or even a blanket lien naming all your assets. Most Purchase Agreements will have language that a business or restaurant has to be free and clear of UCC liens before a sell can happen.
If a seller doesn’t want to tell a Business Broker about a UCC lien it will come up once the closing attorney does a lien search. Talking upfront about these issues with your Business Broker about your UCC lien situation can help the sale of the business. Your Broker should be able to help you through each situation, but they must know first before they can help.
The trust relationship between a Seller and Business Broker can be the difference between a business selling or not. Nobody hates surprises more than a Business Broker when they think they know all the details about a business they are trying to sell. Your Business Broker is like your lawyer, they need all the details before they can successfully represent you. The best piece of advice is to Disclose, Disclose, Disclose!
For more information on the restaurant market and other available consulting services or restaurant valuations, contact Dominique Maddox at 404-993-4448 or by email at [email protected]. Visit our website at www.EATSbrokers.com
