Business Sale Readiness Checker

Start with what a buyer's due diligence will check: an up-to-date minute book and share records, three years of accountant-prepared or reviewed financial statements, current tax and payroll filings, written key contracts, a lease with enough term left, signed employment agreements, and trademarks, domains and accounts in the company's name. Then reduce the things buyers worry about, such as dependence on you or one large customer, and speak with an accountant about the structure of the sale. This tool scores those areas and lists what to fix first. It is general information, not legal or tax advice.

Often one to three years. Some fixes take days, such as moving a domain into the company's name. Others take much longer, such as reducing reliance on you, diversifying customers, or restructuring so that shares qualify for the lifetime capital gains exemption, whose tests look back 24 months. The longer your runway, the more of the work can be done on your timetable rather than a buyer's.

Buyers generally adjust what they offer, or how they structure payment, for risks they find. Common ones are heavy reliance on the owner, a single customer making up a large share of revenue, financial statements that are not reviewed or are hard to rely on, a short lease, unresolved disputes, unclear ownership or contract consents. The effect depends on the business and the buyer. It might be a lower price, more of the price paid later through an earn-out, a holdback, or special indemnities.

You are not required to have one, but it helps. A lawyer can run a pre-sale clean-up of your corporate records, contracts and lease, prepare a non-disclosure agreement before you share confidential information, and review the letter of intent before you sign terms that are hard to walk back.

The lifetime capital gains exemption (currently about $1.25 million per individual, indexed to inflation) applies, for most businesses, only to a sale of qualifying small business corporation shares. One of the tests looks at the company's assets: more than 50% must have been used mainly in an active business throughout the 24 months before the sale, and 90% or more at the time of sale. Purification means moving non-active assets, such as excess cash or investments, out of the company so those tests are met. It is accountant-led work and often has to start well before a sale.

They do not end automatically. A guarantee is a contract with the lender or landlord, so it stays in place unless that party agrees to release you or accept a replacement. Make a list of every guarantee early and negotiate the release or replacement as a closing item, so you are not still liable for a business you no longer own. Our free personal guarantee tracker can help you list them.