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A business transfer, whether you are the buyer or the seller, is a complex legal process that can involve many individuals besides the buyer and seller. To ensure that you are making the correct decision to buy or sell requires understanding the players and the process that make up the business transfer. In the end, the decision is yours, so you should also know what steps you can take to make sure that your decision is an informed one.
Learn More About Business Transfers:
Attacking important decisions
When making decisions, it is normal to want the comfort that the decision is informed and the right choice. When making a business decision, the stakes are even higher. The internet has so much information available that you could easily research for hours, days or weeks on any given topic. How do you filter the information and decide what is important to review?
The first step is to identify what information is important to your evaluation of the situation and making a decision. For example, if you are considering a business purchase, you will want to identify key things that are important to you. Return on investment, location and hours of operation may be important, but they may vary in degree of importance. A single mother may find that a business that only operates 9-5 is ideal so she has evenings and weekends free for her family obligations. A retiree may find that a business in a resort community like the Adirondacks is ideal because of the lifestyle and environment. An investment entrepreneur may value nothing more than the highest profit opportunities and care little about the nature of the business itself.
Once you identify what is critical to your decision-making, you can identify some “deal breakers” – factors that will be dispositive of the outcome. For example, if the business is within five miles of a strong competitor or is located in a rough neighborhood, you may find that it is not the right opportunity for you.
The next level should focus on how a given direction will relate to your personal belief system and core values. Ask yourself questions such as: How will this business affect your work-life balance? Will this business further my efforts to be “green” in my lifestyle? Will this business allow me to be an active participant in the local community? You will spend a significant portion of your time, energy and money on this business endeavor. It is important that you achieve personal satisfaction along the way.
It is prudent to involve your trusted advisors in your evaluation process – lawyers, accountants, business coaches, financial advisors, and even friends and family. Be sure to convey what is important to you so they can focus and evaluate from the same perspective.
Before you sell your restaurant
Before you begin the complex process of selling your business, get your affairs in order. The more prepared you are, the smoother and faster the transaction will go.
Update your books and records. Collect all documents and get them organized. You need at least three years’ worth of financial records together to show the steady business or increasing business trends.
Get your policy manual and recipes up to date. Things probably changed over the years since you first adopted policies and procedures. Be sure the written records mirror actual practices – otherwise something seems “fishy” to the potential buyer.
Prepare an inventory of the assets you will include in the sale. Also make a list of anything that will not be included in a sale.
Get current payoff figures for any debts of the business.
Consider what role, if any, you want to play in the business after the sale. Do you still want to work there? Consult during the transition? Own stock in the company? You may need separate contracts or special considerations if you want to continue to have any involvement in the business after its sale.
Consider your priorities. What do you need from the deal? What do you want from the sale?
Stage the business for prospective owners. Do necessary repairs and cosmetic improvements. Clear personal clutter that will keep them from envisioning themselves as the owners.
Make a list of the positive attributes of the business: its location, reputation, key personnel and special recipes. What sets your business apart from one down the street or in the next town?
Start to delegate responsibility and train your staff. You are selling the business – it must be able to run without you. You must transfer your experience to the new owner and staff to ensure continued success. This makes good business sense, especially if there is any seller-financing.
Seek professional advice on the value of the business. Accountants, lawyers, brokers, appraisers – there are many people who can help you determine an asking price.
Keep the sale “close to the vest.” Do not worry employees, lenders and customers. The less people know, the better.
Evaluating a business opportunity
Before dubbing a possible venture as the “perfect” business opportunity, it is important to evaluate it thoroughly. Regardless of how well the business is currently run, you will undoubtedly want to make some changes in the business after you take ownership. Before leaping into the purchase, you will have to “run the numbers” to determine if this is a viable business for you by calculating your major costs:
Rent or taxes
Beverage costs (especially alcohol)
Credit card fees
Utilities and garbage removal
Licenses, permits, inspections
Grease trap maintenance
Advertising & promotional costs
Supplies & inventory costs
It is also important to explore the area to understand trends that may impact your business. How are other businesses doing in the area? Is there a planned road or construction project in the town? Learn all you can before you jump in full speed ahead.
Roles and responsibilities of the participants
This is certainly not a comprehensive list, however, it will summarize the important parties and roles involved in the commercial transaction you are about to undertake.
The seller's responsibilities are to (1) clear title objections raised by the buyer, (2) prepare the premises to deliver possession in "broom swept move in condition," (3) provide tax and judgment searches to show there are no liens against the property and that the taxes have been paid, (4) make any repairs necessary or negotiated in the contract or addenda, (5) remove any contingencies in the contract, (6) reasonably cooperate to facilitate inspections required by the Buyer's attorney or bank, (7) actively engage in due diligence disclosure with the buyer and (8) obtain any third-party consents or approvals that may be necessary.
The buyer's responsibilities are to (1) secure financing, (2) arrange for prompt inspections, if required, (3) remove contingencies in the contract (sale of another business, financing contingency, etc.), (4) reasonably cooperate in anything required by the title company, attorneys or bank for closing, (5) diligently review the due diligence disclosures by the seller and (6) promptly apply for necessary leases, licenses, permits and the like.
Real Estate or Business Brokers
Technically, once you have "gone to contract," the broker's responsibility ends. However, this is where service counts, and your broker may be a wonderful resource in facilitating the process. Brokers may assist in scheduling inspections, collecting documents required for financing or clearing of title objections, working with building departments to get certificates of occupancy/compliance, and other miscellaneous things necessary for closing. If your broker assists in any of the foregoing, he is offering you "deluxe service" and you can be sure you have selected a great broker who goes the extra mile for the client. (Ultimately, however, the buyers and sellers are responsible to do what is necessary for closing).
Loan Officer or Bank Representative
The loan officer acts as a liaison of sorts and assists in collecting information from the buyer, which will be used by the loan underwriter for the bank to determine if it will offer a loan, upon what terms and at what rates. Your loan broker will assist you in applying for and selecting the best loan product for your needs, will help you qualify, and will help you in the process of providing information the bank will need to offer you the loan. For example, a small business owner without traditional pay stubs may have trouble providing income verification. A loan broker may help you qualify for a "stated income" loan. A potential purchaser may also qualify for incentive programs for low income, middle income, downtown revitalization and many other programs. Your loan broker is an expert on the many loan products available.
The bank attorney represents the bank's interests at closing. The bank attorney assures that the proper documents are executed to extend the loan and secure the obligation. These will include a promissory note, security agreement, loan and related documents. The bank attorney also assures that the collateral (the property) is (1) worth a sufficient value to secure the loan (usually via an appraisal), (2) free from encumbrances (e.g. liens, judgments and other outstanding mortgages), (3) not in jeopardy of things which would negatively affect the value (judgments against the buyers, environmental hazards, legal liabilities, zoning or building code violations, etc.), and (4) taxes and insurance will be paid on the property throughout the term of the loan (to avoid a loss due to fire, disaster, or tax foreclosures). (This is often done through an escrow account.) To assist in this process, an abstract, appraisal, judgment search, lien search, survey and title report are usually obtained by the bank attorney. Who pays the cost of these items is subject to both custom and negotiation in the contract.
Title Closer or Title Attorney for Real Property
The title attorney's job is to be sure that title is clear to transfer. In addition to ensuring that taxes are paid and no liens exist on the property, the title attorney will look into prior transfers and the chain of ownership. Of particular importance are wills and intestate transfers (passed upon death where there was no will). The title attorney wants to be sure the seller is the only owner and has the right to transfer the property to the buyer. The title attorney may also look into some of the same issues as the bank attorney.
The seller's attorney prepares documents to transfer the property to the buyer. The seller's attorney also ensures that the sellers are getting those things to which they are entitled under the terms of the contract, especially utility and tax adjustments. The seller’s attorney also protects the seller if there is seller financing involved in the transaction.
The buyer's attorney will check all of the documents prepared by the seller’s attorney from the buyer's perspective. While other parties owe their allegiance to the bank or seller, the buyer's attorney has the responsibility of protecting the buyer in every aspect of the transaction. The buyer's attorney will advise the buyers about the terms of the transfer, the financing, the status of the property and the entire bundle of rights affecting the buyer in the course of the transaction. For example, the buyer's attorney tries to be sure the terms of the bank are not overreaching or burdensome to the buyers. The buyer’s attorney prepares documents for closing, reviews the documents of all other parties, and checks to be sure that all of the taxes and utility charges that should be properly assessed to the seller are accomplished via closing adjustments. Traditionally, the buyer's attorney does much of the coordination of the various parties in the transaction and brings the closing together.
Documents needed for sale of property
For closing, the following must be provided by the Seller:
Survey of the property
Deed for property (merged deed or deeds for all separate parcels)
Name, address, phone, fax and account number of mortgage company
Name, address, phone, fax and account number of home equity mortgage company, if any
Copy of receipt for payment of school taxes
Copy of receipt for payment of town, city and property taxes
Copy of receipt for payment of county property and special district assessments taxes
Social security numbers
Copies of all certificates of occupancy for new construction (barn, pool, deck, fence, etc.)
Abstract of the property
Copy of the Sales Contract or Purchase Offer
In some cases, other documents may be needed, but the above list comprises what is generally necessary.
Documents needed for sale of business or its assets
Copy of the Sales Contract or Purchase Offer
Asset Purchase Agreement
Bill of Sale
Pledge and Security Agreement
Notification of Sale, Transfer or Assignment in Bulk (AU-196.10)
Existing Lease and Amendments
Assignment of Leases, Rents and Profits
Letter of Intent
Many commercial real estate transactions begin with a Letter of Intent that outlines the key terms of the transaction. This memorializes the basic terms of the agreement that the lawyers will detail in a fuller purchase contract. A Letter of Intent might look like this:
Letter Of Intent And Agreement To Purchase (PDF)
The Offering Document (Prospectus)
The Prospectus is written as a go-to-guide for potential buyers of your business. It is where you win or lose in getting your asking price. This is the document that sells the business to the prospective buyer. It will be evaluated by family members (who exert a lot of influence!), lawyers, bankers, investors, accountants, brokers and others involved in the process. What do you include? Here are some basics:
Describe the opportunity. What is attractive about your business opportunity?
The history: when the business was started, by whom, the number of employees, annual sales, key strengths, future goals and why it is being sold.
The location (without a street address) in terms of proximity to major transportation routes, shipping centers and population density.
Who the customer base is – what the market or niche is and who the competitors are.
A basic overview of the assets being sold.
Key personnel and general staffing information.
Licenses and permits (alcoholic beverage, lottery, etc.)
Ownership of the restaurant (individuals, a business entity, a multi-generational family, etc.).
Ownership of the land and building. Who owns it and what are current lease terms and appraisal value?
Expansion possibilities. Can you build out? Is there room to increase parking?
A statement of confidentiality – a reminder that patrons, employees and vendors are not aware of the potential sale.
Price and any possibility of seller financing.
Basic financial data to justify the price.
Anything else important to tell your prospective buyer.
Do NOT give confidential detailed financials, a complete inventory listing, “dirty laundry” or details that are not meant for the public. These details are often exchanged after a purchase contract is entered, prior to closing.
Determining a price
There are many ways to value a business. It is important to work with professionals to determine a realistic price. Some valuation methods include:
Key components to the overall price are:
Profitability of the business
Historical track record
Lease terms or real property value
Availability of seller financing
Whether alcohol can be served
Key personnel (chefs, bartenders or party planners)
Value of physical assets
Value of branding and intellectual property
What is “good will” of a business?
When you purchase a business, the purchase price will be allocated to equipment, inventory and intangible assets such as the non-compete clause and good will. Good will generally is the amount over and above the assets and inventory value and the asking price.
Good will is the reputation of the business name in the community; in other words, its income and earning potential. This evaluation certainly has a subjective component; however, a good review of the business’ books, records and tax returns will reveal the operating history trends that are the “hard numbers” that provide insight into the real earning potential of any business investment. It is highly recommended that you have an accountant on your team of advisors to help in this evaluation and due diligence document review. You may consider engaging a business appraiser for significant investments.
Bulk Sales Tax Notice
The New York State Department of Taxation and Finance requires that each purchaser of business assets (that are substantially all of the business value/assets) provide at least ten days’ pre-closing notice to the State. The State can then determine if the seller has any unpaid sales tax due and limit the buyer’s ability to disburse all or a portion of the purchase price to the seller until any outstanding sales tax obligations are paid. If this document is not properly filed, the buyer could be personally liable for the seller’s unpaid sales tax (to the extent of the purchase price). Unfortunately, many transactions are done without filing a Bulk Sales Tax Notice and the buyer consequently faces unnecessary fines and penalties. Proper filing absolves the buyer of responsibility, so it is critical that this be done timely and correctly. An experienced business attorney can assist with this process to protect the buyer.
What happens after the sales contract
Once you have contracted to purchase the business, both parties will proceed to carry out their obligations under the contract. Primarily, buyer will order inspections, review the legal status of the assets and property prior to acceptance, and arrange for financing of the purchase. Seller will update the corporate books and records, update the abstract, order tax, bankruptcy and judgment searches. This stage is the proverbial paperwork shuffle. This process usually takes from three weeks to two months to reach closing.
Closing will be scheduled rather last minute, but you should know about a week in advance that closing is approaching. The date in the contract is a "wishful goal” and is by no means set in stone. However, you can expect closing to be within 10 days of that date either way in most cases. Keep this in mind when making plans for your move and notification to utility companies, moving companies and landlords. It is best not to make any notice until after the closing is actually scheduled.
All or most of the parties involved in the process will be present at the closing. The closing will finalize the transaction and complete the ownership transfer. Closing will take place at the Seller's attorney's office in most cases. Closing will normally take one hour to ninety minutes. You should plan to take a full half-day from work on closing day. Sometimes the closing takes three or four hours if problems arise. Dress appropriately and bring a driver's license. You may also need to bring both a certified check and a personal check toward closing costs and adjustments. Your attorney will advise you of these details prior to closing.
In most cases, the buyer is responsible for the following closing costs: engineer and other inspections; licenses and permits; recording of deeds and security agreements for loan financing; sales tax and mortgage tax; and legal fees. Your bank will likely assess closing costs against you such as points, legal fees, bank inspections, credit reports, notary fees, appraisal reports and related items. These costs will be set forth in your loan disclosure documents when you sign for the loan at the bank. The bank may also require you to advance one year's worth of taxes and insurance (this also will be a term in your loan documents if it is required). Average costs might be: $1,500 - $5,000 for closing, depending on the complexity and magnitude of the transaction.
The attorney will customarily advance some of these costs and will be repaid at closing.
In most cases, the Seller will be responsible for the following closing costs: preparation o transfer documents and financing documents; tax, lien, bankruptcy and judgment searches; broker commissions and seller’s legal fees. However, the actual terms may vary according to the agreements reached in your purchase offer, binder or contract of sale.
Tax obligations in a business transfer
If you are purchasing or otherwise acquiring some or all of the business assets of an existing business, you may be held personally liable for any sales taxes determined to be due from the seller. You may be held liable for the amount of the seller’s unpaid sales taxes, up to the selling price or fair market value of the assets purchased or acquired, whichever is greater. This applies whether the assets you are acquiring are tangible personal property, intangible property, or real property. The sale, transfer, or assignment of business assets in this manner, in whole or in part, is called a bulk sale transaction.
The purchaser is not held liable for the seller’s unpaid sales taxes if he or she notifies the Tax Department of the pending bulk sale transaction at least 10 days before paying for or taking possession of any business assets, whichever occurs first, by filing the appropriate form and sending it by registered mail to the address given on the form. Within 5 business days of receiving the form, the Tax Department will advise you if it is possible that the seller has any unpaid sales taxes. If the seller has unpaid sales taxes or is selected for additional review or audit, the Tax Department will send you a Notice, which will advise you not to pay the seller until the Tax Department completes its review of the seller’s sales tax account. If the seller does not have any unpaid sales taxes and if an additional review or audit is not necessary, the Tax Department will send a Release that allows you to turn over any consideration to the seller.
In addition to your obligations with respect to sales taxes accrued and determined to be due to the Tax Department from the seller, you are also responsible for paying the sales tax due, if any, on the purchase itself. Sales tax is not imposed on the sale of real property or intangible assets, such as goodwill. Consider the following examples of business transfers and whether they qualify as a bulk asset transfer:
Example 1: Corporation A, a person required to collect sales tax, sells its business assets to Corporation B. The sale by Corporation A is a bulk sale transaction.
Example 2: Corporation A, a person required to collect sales tax, transfers all of its business assets to Corporation B in exchange for stock in Corporation B. The transfer of Corporation A’s assets to Corporation B is a bulk sale transaction.
Example 3: Corporation A purchases all the issued and outstanding stock of Corporation B, a person required to collect sales tax. Corporation A and Corporation B will continue to exist as separate legal entities. Since the business assets of Corporation B have not been transferred in connection with the sale of its stock, this is not a bulk sale transaction.
Example 4: Corporation A, a person required to collect sales tax, sells its entire inventory, which is purchased by Corporation B for resale. The sale by Corporation A is a bulk sale transaction.
Example 5: Mr. Smith, a person required to collect sales tax, makes a gift of all of his business assets to another person. This transfer by Mr. Smith is a bulk sale transaction.
If you are acquiring a business that has an interest in real property, such as a deed or a lease, the transaction may be subject to the real estate transfer tax. In addition, the tax applies in the acquisition or transfer of a controlling interest in a partnership, corporation, or other entity with an interest in real property. The tax may apply to the acquisition or transfer of a minority interest that is part of a larger transaction. Controlling interest means (1) in the case of a corporation, fifty percent or more of the total combined voting power or of the capital, profits, or beneficial interest in stock, and (2) in the case of a partnership, association, trust, or other entity, fifty percent or more of the capital, profits, or beneficial interest in such partnership, association, trust, or other entity.
Any license or registration that is required for any of the miscellaneous taxes may not be transferred to you or your business from another individual or business, even when you purchase an existing business. You must complete new registration forms for your business and file them with the Tax Department.
As the owner of a business, you are required to keep records that enable you to prepare complete and accurate tax returns for that business. You must also keep documentation such as canceled checks, paid invoices, or both, to verify the records of your business. Generally, you may retain any required records in either hard-copy or electronic format (or both). All such records should be maintained in a manner so that one period may be compared with another.
If your business must register as a vendor for sales and use tax purposes, it must keep detailed records of all sales by jurisdiction. Your business must also maintain a method of associating an exempt sale to a particular purchaser with the exemption certificate your business has on file for that sale or purchaser. If your business issues exemption certificates when it makes purchases, it must maintain records of these purchases, substantiating exempt use.
If your business is registered for sales tax purposes and you sell or otherwise discontinue the business, your business must surrender its sales tax Certificate of Authority with the final sales tax return. The final return is due within 20 days of terminating business operations.
Most state and federal licenses and registrations are not transferable to another person or entity. One way around this is to do a stock transfer rather than a bulk asset transfer. In that case, the owner of the license and registration remains the same.
Dissolving a New York Corporation
When you sell a business, you will often want to dissolve the corporation to avoid future liability and franchise taxes for the business. (Sometimes, you need to keep the corporate entity open, for example, if the transaction is seller-financed and the corporation is payee on any notes or the secured party on any collateral.) A business corporation may be voluntarily dissolved by filing a Certificate of Dissolution. The completed Certificate of Dissolution, together with the required consent(s) attached and the statutory filing should be forwarded to: New York Department of State, Division of Corporations, Once Commerce Plaza, 99 Washington Avenue, Albany, NY 12231.
The Certificate of Dissolution requires the consent of the New York State Department of Taxation and Finance to show that there are no outstanding tax liabilities of the corporation before it ceases to exist. To request consent, you may call (518) 485-2639 or write to: New York State Tax Department, Corporation Tax Dissolution Unit, Building 8, Room 958, W.A. Harriman campus, Albany, NY 12227. In addition, consent of the New York City Department of Finance must be attached to the Certificate of Dissolution if the corporation has done business in and incurred tax liability to the City of New York. To obtain this consent, contact the New York City Department of Finance, Collections Division, Vendor/Tax Clearance Unit, 59 Maiden Lane, 25th Floor, New York, NY 10038. Additional information is available on the New York City Department of Finance’s website.
Things to consider in construction contracts
Building out can be exciting, filled with many possibilities for how you want your business space to look and function. However, it is also a complex legal transaction with many factors to consider. It can be more complicated than purchasing an existing building.
Have you researched the builder’s reputation?
Who owns the real estate where the new construction will be located?
Have you seen a “stake out” of the site done by a surveyor (rather than rely on a tape map)?
Are there restrictive covenants?
Is the site in a flood zone, wetland or development district?
Are there tax rebates available at this site?
Is there adequate parking available?
Will there be curb cut or entrance restrictions due to highway regulations?
Are you in a state or local park or reservation?
Are utilities available at this site?
Is the site zoned for your intended use?
Where are easements located?
What is the price? What are the extras? Are the extras in the appraisal for financing determinations? How will extras be paid? If there is no closing, can prepaid extras be refunded?
What fees will you pay for? The buyer often pays most of the seller’s costs/fees in a new construction contract. How do these affect the total purchase price and your budget? Are they in the appraisal for financing determinations?
When will the builder be paid – in draws through construction or all at closing? Who determines when draws are earned or will be paid?
What utility hook-up costs will be incurred?
If the builder is advanced payment prior to closing will it be escrowed until closing or will it be used along the way?
Do the contingencies in the mortgage match those in the construction contract? Are there any discrepancies or contradictions?
Will there be a second mortgage provided? Since there is a 3-day recession period, will be possession (move-in-date) be delayed by 4 days from closing?
When will construction begin? Will it only be after you have finished your current lease? Do you have an interim/temporary place to work, or are you prepared to cease operations if there are delays?
What things will delay the anticipated closing date? How will they be dealt with? For example, if materials are delayed, construction cannot proceed on schedule and a certificate of occupancy cannot be obtained as the schedule anticipated. The bank will not release the mortgage proceeds until a c/o is issued.
When must the buyer select materials and how does this relate to the construction schedule?
How will the “punch list” (list of incomplete items at final inspection) be handled? Will there be an escrow for the incomplete work? What will the timing for completion be?
What warranties are provided? Are there caps or limitations?
Who will do your final inspection? Will you rely on the building inspector or use your own engineer or architect?
Can you negotiate a penalty for builder’s failure to close on time?
When is possession? Will you be able to move anything into the building prior to closing?
Purchasing vacant land for commercial use
In some cases, purchasing vacant land for your dream business can be more complicated than the purchase of an existing structure. You may require the services of an attorney, surveyor, architect, civil engineer, general contractor and/or banker to structure the transaction to meet your needs.
Things to Consider in Choosing your Parcel
Location: rural, village, city, close to expressway, work, schools, stores, or special services
Type of land: open fields, woods, water features, hills
Aesthetics: hill top view, pond, stream
Parcel size: lot, acreage, farm
Type of property: single, unit in shopping mall, plaza, etc.
Approximate square footage of proposed space
Out buildings: shop, kennel, barns, sheds, boarding stables
Outdoor storage: many towns have zones that do not allow outdoor storage of boats, campers, utility trailers, etc; Self-employed contractor, plumber, electrician on-site storage of materials, vehicles
Home business: hairdresser, auto, small engine, repair shop, ceramic shop, professional office, farm market
We recommend that boundary lines be staked by a surveyor so you can see “in the field” where the property boundaries are located with precision. Many people purchase vacant land for custom building to meet very particular or special needs. We recommend that you carefully list all of your needs, differentiating between your “wants” and “musts.” This list will assist you in selection of parcels and assist in determining required approvals, permits or zoning variances. Obtain a copy of the local zoning code and review it to determine which parcels will most closely meet your needs. Once you have chosen a few prospective parcels, consider meeting with the local building inspector to discuss your plans. Uncover any issues before your purchase!
Permits and Variances
Depending upon the parcel chosen and your specific needs, there may be a variety of permits and variances required. Other than site plan approval by the local jurisdiction (village, city or town) and a building permit, you may be required to obtain special use permits, variances, county health permits for septic systems and/or well, DEC permits for work along streams or steep slopes, Army Corps of Engineers permits for wet lands, County Agriculture Department approvals, Highway Department Road Boring Permits, and the like.
It is recommended that any offer to purchase be contingent upon obtaining approval to build and any permits or variances required for your special needs.
A major “unknown” when you first see a vacant parcel is the cost of improving that parcel to build. The site development costs typically include engineering fees, permits and variances, wells, septic systems, grading and driveways. These costs can exceed the purchase price of the land (shallow bedrock may exist, for example). Prior to purchase of a particular parcel, it is recommended that a purchaser obtain a realistic cost estimate for these costs and be sure they are within his or her budget. In some cases, a higher priced parcel is a “better buy” where the cost of improving the higher cost parcel may be much less than the lower cost parcel. This may be the case where utilities have to be brought great distances, as these costs add up quickly.
A “walk through” by local excavating company can give you a rough estimate with respect to the cost of doing site preparation—grading, septic, and driveway excavation. A firm cost may be obtained with a finished site plan. It is important to determine if the lot has been previously filled because foundation footings must be poured on naturally compacted soils.
Local utility companies will provide estimates with respect to the cost of bringing their service to your parcel and/or building site including “tap in fees.” Tap in fees are common for water, sewer and gas. Where a well or “private water” is anticipated, it is also prudent to explore water quality with the neighbors. However, keep in mind that even wells nearby can produce dramatically different water quality due to depth, soil, bedrock, and other factors.
An “approved” building lot means the municipality has approved a site plan for building on that parcel and that utilities are available “at the road.” Many lots are advertised as “approved building lots” but fall short of being “shovel ready.” It is important to understand that approvals are time limited and may have expired or will expire before you begin construction. You may need to update these approvals, an additional cost to consider. The site map for the parcel should contain the following (in addition to things required by the local jurisdiction):
Survey marking the corners of the parcel and any buildings
Location of all easements and rights of way, including public utilities
Geography—topography, water table, bedrock depth, wet lands, flood zones, streams, natural drainage features, and other natural barriers
Location of future buildings
Elevation grades for all buildings/roadways
Road cuts for driveways
Location of public utilities water, sewer, electric and gas (state and local codes require to use of public utilities if they are available)
Placement of utility service lines (water, electric sewer, etc) to building site from nearest utility drop/tap
If public water is not available, location of the well
If needed, the design of a septic system to meet County Health Department requirements
Even if the parcel has been previously approved, an updated site plan containing any changes to meet your specific needs may be required.
In the absence of a site plan, the local building inspector can likely give you information about locations of public utilities, septic systems, and grading for similar properties. He may also be able to provide information about water quality and average well depth of nearby wells.
What is the zoning designation where the parcel is located: residential, agricultural residence, agricultural, commercial?
Is the intended use permitted in such zone?
Nearby land utilization: farms (farms often contain noxious odors from manure, rotting produce and the like), commercial or manufacturing.
Are there similar land uses nearby?
Is the lot size sufficient to meet zoning requirements for intended use?
Is this to be a subdivision from a larger parcel? Has the municipality approved the subdivision?
Does proposed building size and type meet zoning requirements?
Are there any covenants (such as agricultural districts or rights of way) that would restrict land usage?
Are there any natural barriers (steep slope, streams, wet lands) that must be modified?
Are there any special permits or variances necessary prior to getting a site plan approval?
Are there any deed restrictions that would limit intended use?
Do not let “love” of a particular parcel supersede common sense. Carefully compare your needs with the zoning for the parcel and the budget for developing the site for construction. Determine what, if any, permits or variances are required and if it is realistic to obtain them. Attempting to obtain variances and permits after commencing the building process will most likely lead to disappointment and/or unnecessary expense.
Emotional impact of selling your business
When you first started your business, you may have left a good job, mortgaged your home, and spent the next several years pouring all the sweat and blood you could muster into building a successful business. Now the time has come to sell your years of hard work. Stress can make the selling of your business seem anticlimactic. You bulging bank account may not seem to fill the void that is left from no longer feeling the satisfaction of working to building a successful business. If you find yourself already planning how to spend your capital gains and are jumping headfirst into retirement, then count yourself lucky. Entrepreneurs are by nature restless and can find it difficult to transition to a quiet life.
Selling the business can also create a huge sense of loss, as for most entrepreneurs, their whole identity was wrapped up with the business. No longer holding the status of “business owner” and carrying the responsibility of running a company, it is time to undergo the arduous task of redefining yourself. Seller’s remorse is a common emotional pitfall stemming from this change.
One more realization that you must contend with is that life goes on, but never as you once knew it. Patrons visit new establishments if your business has closed its doors. If you sold your business and the new owners do not continue your legacy, you may regret your decision. If the business does well under new ownership, then you might question the purchase price or whether it was even time to have sold. Worse yet, you may resent that your business is succeeding without you. Any changes to the business under the new management will certainly be questioned and may even seem offensive.
All of these thoughts and emotions are normal and common. As with any change or loss, you must allow for the time it necessarily takes to adjust and move on and to find new hobbies in which you can devote your energy.
You may find part of your time devoted to addressing the various wealth managers, private bankers, charities, long-forgotten friends and new acquaintances that will inevitably appear with your new life (and loot). Here you can utilize your analytical skills and that amazing power that you cultivated as a business owner to weed out the superficial and envious so that you can surround yourself with a positive, supportive, stress-free influence.
Time once spent breaking your back to produce a successful business can now be turned to the multitude of family, friends, hobbies and outside interests for which you had limited time when you were still running a business. Rest assured you can still stay active in the business community by contributing your knowledge and expertise. The point is to view the change as an exciting new chapter rather than a desolate retirement.
Rather than retiring, you may find yourself looking for the next business opportunity in which to focus your powerful work ethic. In fact, about half of all entrepreneurs who have sold their business end up starting a new venture. If retirement isn’t going to beat the adrenalin of making business happen, then perhaps your new chapter will be written on a new business venture.
A commercial endeavor is an emotional adventure from beginning to end. Wherever you decide to move on to, acknowledge the pitfalls that accompany any major life change and then start taking action towards what life now has in store for you.
Tracy P. Jong, Esq. |
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