Selling your business in San Diego County can be an exciting opportunity, but it also comes with a variety of legal challenges that need careful attention. One of the most common pitfalls is unclear ownership of assets, which can lead to disputes during the sale. Ensure that all assets, including physical property, intellectual property, and contracts, are in the selling company’s name and not in any individual owner’s name. This includes verifying that your intellectual property (IP), such as trademarks, copyrights, or patents, is correctly assigned to the business entity and not to individual owners. Failing to address these issues can cause complications and delays in the sale process.
Another key challenge is making sure your employees are properly classified. Many small businesses improperly classify their workers as independent contractors when those workers do not satisfy the ABC test under California law. No buyer wants to buy a potential employment lawsuit. A careful analysis of workers that are classified as independent contractors should be done in advance to ensure that those workers are properly classified.
Finally, you want to make sure that your key contracts (whether those are with customers, vendors, distributors or key partners) are properly set up and assignable. If your key contracts are not assignable, it can cause problems and delays in the sale as the buyer will want to assume those key contracts. Some contracts allow for assignability upon the consent of the other party. It is important to understand which contracts require consent and which ones can be assigned without consent of the other party before going into a transaction.