Reviewing the Company Liabilities

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Current Liabilities

Selling a company comes with its obligations. The obligations that should be included are those line items that produce income.

Current liabilities include the following:

• accounts payables
• salaries
• short-term notes
• other

The buyer wants to see payable accounts that support the day-to-day operations of the company. These accounts should be paid on-time, taking advantage of discounts and other payable perks.

• Accounts payables that are not operating expenses should be removed or paid off prior to presenting the company to the prospective buyer.

Short-term notes include loans that must be paid back within 5-7 years. These loans should be exclusively tied to the operating needs of the company.

• If at all possible, you should pay off these loans prior to the sale. Many buyers do not want to assume any short-term loans.

Long-Term Liabilities

What are the long-term liabilities:

— long-term notes for building and land
— long-term notes for equipment
— other long-term notes
— other

In most cases, buyers will only assume those obligations that are directly tied to the income-producing assets of the company, such as operating equipment.

Buyers generally will not buy the land and building if it is owned by the seller. Including the real estate in the sale will increase the cost to the buyer while keeping the company earnings at the same level. The buyer's going cash position will be decreased making the business less attractive.

• The seller's best option is to not include the building and land in the business sale. You should list the building and land as a separate sale if the buyer is interested. In many cases, the business owner leases the facilities back to the buyer with an option to buy.