To sell their business.
Before you grab that listing agreement, You had better know what your doing. Legal aspects of representing the "good will value" of any incorporated company or small business, no mater how small "technically" requires a registered securities trader (series 7 holder) to perform, and better have substantial basis of fact for establishing that value. Why, because you being the agent, are representing the value to the public.
The SEC last year issued a no-action letter at the request of the IBBA (international Business Broker Association). What does this "no action letter mean, it means that there is a fine line between and asset sale and a stock sale, and while the SEC has no penalized the activity, they may at any given moment, based on particular merits.
A Basis of fact, when representing the sale of a business. first, If you do not now how to correctly value a business have someone in your offices who has training or experience in establishing a value. Never allow the owner to say this is what i want for my business, then say OK, no problem.
Their tax return must be part of the file, they should have at minimum of 2 years of federal tax returns showing how much the business made. If they don't want to give you a copy, my suggestion is walk away. Don't get caught saying in a ad, highly profitable store when the business has shown a dime in earnings on its tax returns. I have seen this more than a few agents take business listings and represent value with no material facts in hand, other than what a business owner told them. Additionally, remember that cash a business makes cannot be udderd from you as an agent in the sale, nor should it even be discussed. Remember not paying taxes is an illegal activity, if you as agent is talking cash buisess with a potential client you are technically a witness to a crime, therefore having to report it. Don't report it, guess what? you are part of the crime. The same holds true about publishing net profit or any item what would appear as a material fact, if you can't verify it, it doesn't exist. If something angers a potential buyer after the transaction you can be in some serious heat for representing the transaction. For brokers allowing agents to walking with listings for business for sale, they are on the hook as well, and i wouldn't count on errors and admission insurance covering business transactions.
Remember there is a significant difference in representing the sale of a home because of its tangibility, and the "Good will Value" of a business, which is transparent. So always represent the facts, and have a basis of establishing value in any business sale.
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