Successful entrepreneurs may from time to time consider whether it may be time to maximize the return on the long hours and years they’ve put into building their business. This could include pursuing a sale of the business, so called "cashing-out". In the event the owner chooses to move forward down this path, it is likely that the most effective way to do this, is to hire a business broker to sell the business.
After discussing the opportunity with a business broker, the next step would be to execute a Business Broker Agreement.The key components of a Business Broker Agreement are:
- Identification of the Business and assets/shares being sold;
- Length of the Agreement;
- Exclusive or non-exclusive representation;
- Compensation; amount, percent/fixed fee;
View the collection of legal forms and documents required when selling or buying a business.
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BUSINESS BROKER AGREEMENT
This BUSINESS BROKER EXCLUSIVE AGREEMENT ("Agreement") entered into as of the _____ day of 20__ ("Effective Date") is between Business Broker ("Broker") and Name of Seller ("Seller") and Name of Company ("Company", or "Business").
WHEREAS, Seller is interested in pursuing a sale of the Business, and
WHEREAS, Broker is in the business of listing and offering businesses for sale,
NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement, the adequacy and sufficiency of which is hereby acknowledged, Broker and Seller agree as follows:
1. In consideration of Broker accepting for sale and agreeing to provide its best efforts to culminate in the sale of Business, Seller hereby gives Broker the sole and exclusive right to sell the business known as Company.
2. Seller agrees that the sale of above-named Business shall include, but not be limited to, all assets of the Business, including but not limited to, fixtures, equipment, goodwill, trademarks, trade names, leasehold rights and inventory. Furthermore, depending on the formation of the Company, the sale shall include shares (Corporation), membership interests (Limited Liability Company) or any other ownership interests.
3. Seller’s desired price is _______ ($_____) and desired down payment is ____________ ($______).
4. The Term of this Agreement shall be for nine (9) months from the date of execution. Either party may terminate this Agreement upon fifteen (15) days’ written notice to the other party. In the event of termination by the Seller, Seller shall reimburse Broker for out of pocket expenses in an amount up to twenty-five hundred dollars ($2,500) upon receipt of invoices for such from Broker. In the event of termination, Sections 13-16 and Section 23 shall survive such termination.
5. Seller represents that seller has not previously entered into a listing and/or sales agreement with another Broker or Buyer regarding the Business except as follows, if applicable: ___________________________________________________________.
6. Seller agrees to refer to Broker any prospective buyer Seller may have had contact with regarding the sale of the business during or before the term of this Agreement.
7. Broker is authorized to cooperate and compensate brokers who might participate in a co-brokering agreement for the sale of the Business.
8. The Seller represents that Seller has clear title to the Business and assets that are offered for sale. If real estate is in any way sold or transferred as a part of this transaction, both Seller and Broker agree to engage as necessary a licensed real estate broker or attorney for such purposes.
9. The Broker is authorized to accept and hold on Seller’s behalf, any deposit made by a Buyer, to be applied toward the sales price at Closing.
10. Seller hereby consents to Broker electing to act as a dual agent when the circumstances warrant, so long as there is disclosure to all parties of such agency.
11. Should any suit be commenced to enforce Broker’s rights under this agreement and if Broker is the prevailing party in said suit the Seller agrees to pay Broker the expenses and attorney’s fees incurred in said suit as well as any damages awarded.
12. Seller grants to Broker the sole and exclusive right to market the Business upon execution of this Agreement until the Termination date of _____________, ______, 20___ ("Exclusive Period").
13. Seller agrees to pay Broker _______________ percent (_____%) of the Business’ purchase price or _______________ dollars ($____________) whichever is greater, upon any disposition of the Business.
14. "Disposition" of the Business in this Agreement shall include the sale, merger, exchange, or transfer of all or any part of Business, except for assets sold in the ordinary course of business. This definition includes, without limitation, the transfer or sale of some or all of the stock of a corporation.
15. "Purchase Price" is defined as the total consideration paid for the Business and its assets, including, but not limited to, cash; cash equivalents; receivables, real property, equipment, intellectual property, consulting or management agreements.
16. Seller agrees that Broker’s Fee shall be paid by the seller upon any disposition of the Business whether made by Broker, Seller or anyone else during the term of this agreement.
17. Seller shall provide Broker within ten (10) days of the execution of this Agreement, the following: a) list of all equipment and other assets to be included or excluded in the sale; b) profit and loss statements, balance sheets and tax returns of the Business for the last three years; c) profit and loss statement, balance sheets, and cash flow statements for the current period; d) leases; e) copies of all licenses, contracts or agreements in any form; f) all agreements relating to employees; h) copies of all other documents relevant to the Business.
18. Confidentiality. During the term of this Agreement, Broker may have access to or receive certain information about the Company that the Company designates as confidential or that, under the circumstances surrounding disclosure, ought to be treated as confidential by the Broker ("Confidential Information"). Confidential Information includes information relating to the Company or its current or proposed business, financial statements, budgets and projections, customer identifying information, potential and intended customers, employers, products, computer programs, specifications, manuals, software, analyses, strategies, marketing plans, business plans, and other confidential information, provided orally, in writing, by drawings, or by any other media. The Broker will treat the Confidential Information as confidential and will not disclose it to any third party or use it for any purpose but to fulfill his obligations in this agreement. Prior to disclosing Confidential Information to any prospective purchaser, Broker shall receive prior written approval from Seller and if approved shall obtain a Non-Disclosure Agreement executed by prospective purchaser with terms at least equal to the confidentiality terms herein.
19. Seller agrees that Broker may publish, advertise or distribute information about the Business to prospective purchasers and other brokers.
20. Seller represents that Seller is now and will remain, in compliance with all local, state and federal laws, rules and regulations as they may relate to the Business.
21. Seller represents that a) all information relating to the Business provided to Broker and buyer Prospects is complete and accurate to the best of the Seller’s knowledge; and, b) Seller has disclosed all material facts relating to the Business which might reasonably influence a buyer’s decision to purchase and the amount a buyer is willing to pay.
22. Seller will indemnify and hold Broker harmless against any claims which result from Broker's dissemination of any information provided by Seller under the terms of this Agreement.
23. Seller agrees to immediately pay the commission to Broker if the Business is disposed of within twenty-four months from the Termination of this Agreement to any person or entity referred to the business by Broker, or to whom Broker, or seller furnished information regarding the business during the exclusive period.
24. This Agreement will be governed by and construed and interpreted in accordance with the laws of ____________. Each party hereby submits itself for the sole purpose of this Agreement and any controversy arising hereunder to the exclusive jurisdiction of ___________, and any courts of appeal therefrom, and waives any objection (on the grounds of lack of jurisdiction, or forum non conveniens or otherwise) to the exercise of such jurisdiction over it by any such courts.
25. No amendment to this agreement will be effective unless it is in writing and signed by both parties.
26. Counterparts. The parties may execute this Agreement in any number of counterparts, each of which is an original but all of which constitute one and the same instrument.
27. Electronic Signatures. This Agreement, agreements ancillary to this agreement, and related documents entered into in connection with this agreement are signed when a party’s signature is delivered by facsimile, email, or another electronic medium. These signatures must be treated in all respects as having the same force and effect as original signatures.
28. If any provision in this agreement is, for any reason, held to be invalid, illegal, or unenforceable in any respect, that invalidity, illegality, or unenforceability will not affect any other provisions of this agreement, but this agreement will be construed as if the invalid, illegal, or unenforceable provisions had never been contained in this agreement, unless the deletion of those provisions would result in such a material change that would cause completion of the transactions contemplated by this agreement to be unreasonable.
29. No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this agreement will be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy will be deemed a waiver of any other breach, failure, right, or remedy, whether or not similar, and no waiver will constitute a continuing waiver, unless the writing so specifies.
30. This agreement constitutes the final agreement of the parties. It is the complete and exclusive expression of the parties’ agreement with respect to the subject matter of this agreement. All prior and contemporaneous communications, negotiations, and agreements between the parties relating to the subject matter of this agreement are expressly merged into and superseded by this agreement. The provisions of this agreement may not be explained, supplemented, or qualified by evidence of trade usage or a prior course of dealings. Neither party was induced to enter this agreement by, and neither party is relying on, any statement, representation, warranty, or agreement of the other party except those set forth expressly in this agreement. Except as set forth expressly in this agreement, there are no conditions precedent to this agreement’s effectiveness.
31. All terms and words used in this Agreement regardless of the number and gender in which they are used shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine or feminine or neuter as the context or sense of this Agreement or any paragraph or clause herein may require, the same as if such words have been fully and properly written in the appropriate number and gender.
32. Each party represents and warrants that it has authority to enter into this Agreement and lawfully make the disclosures contemplated hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.
by Richard Nacht, Esq.
- It may seem obvious that when you decide you wish to sell your business, that a potential purchaser knows what your business consists of. However, being so familiar with your business and its assets, it is quite possible that what you think is obvious won’t be to a third party. How long is your lease for? If it’s for some significant period of time and the terms are advantageous, this may have a positive impact on the sale price. On the other hand, if you have inventory and you have not been able to sell it for some time, a potential buyer is unlikely to pay fair market value for the inventory. A business broker can help you determine the fair market value of your business and can do so in an objective way that you might have difficulty doing yourself.
- The term of the agreement and whether it is to be exclusive to the broker are likely to determine the effort the broker will dedicate to your sale. Brokers who know they will get paid a commission, even if you happen to identify the party who ultimately buys your business, will put their full efforts into representing your business to the market. If you exclude potential purchasers you have already had a discussion with, or any that you know personally, the broker is unlikely to dedicate him/herself to the labor hours needed to give you the best chance to sell. Similarly, since brokers know that it can often take quite some time to find the right buyer for your company, giving them only a short period of time is likely to backfire. Typical in the industry is a minimum of six months and it’s quite normal to have an agreement that lasts for a year.
- The compensation to be paid to the broker is typically based on an industry standard or norm. You may wish to speak with several brokers in order to be sure that the price being quoted to you is within those norms. A reasonable range is between six and twelve percent of the sale price.
- Business owners who are in a position to sell their company are likely to have developed a certain level of expertise in running that business. What they likely do not have is the expertise in selling a business. You have a core competency in running your business; business brokers have the same when it comes to marketing and selling a business.