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Critical Issues When Selling a Dealership

The last 12 months have been an active time for Buyers and Sellers of automobile dealerships. In my experience of representing almost 50 dealers buying or selling a dealership, I have noticed that most deals boil down to a few critical issues. Hiring an attorney to guide you through these issues and the best way to structure the deal is very important. The following items are some of the main issues you should consider when selling a dealership:

Selling Assets or Stock/LLC Interests

Typically, it would be beneficial from a tax standpoint for a Seller to sell stock or LLC interests. However, most Buyers want to purchase assets because they can re-depreciate the assets and they can protect themselves from the Seller’s liabilities that they don’t specifically assume. So typically a Seller will want to ask for a higher price if the Buyer wants to purchase assets so that after taxes, the Seller is in a similar position. Typically a Seller wants to know what money is he or she going to put in his or her pocket after taxes.

Purchase or Lease the Land and Building

Does the Seller want to sell the land and building to the Buyer, or does the Seller want to be a landlord? If the Seller is going to sell the property, can the Buyer deliver clean title and are there any environmental problems? Are there any issues with the building that the Seller will need to either fix before the closing or reduce the purchase price?

If the Seller wants to lease the land and building: What is the primary term? Does the Seller want to grant renewal options? What is the monthly rent? What are the rent increases during the primary term or renewal terms? What is the Seller responsible for under the lease? Most leases are “triple net” meaning the tenant is responsible for the taxes, insurance and maintenance of the building.

Indemnifications

Indemnifications are important to protect both the Buyer and the Seller. A Buyer wants as many representations and warranties as possible from Seller and wants the indemnity period to last as long as possible. A Seller wants as few representations and warranties as possible and wants as short an indemnity period as possible.

Employees

If you are a Seller and you sell assets, you will have to terminate your employees on the day immediately prior to the closing date and pay them all of their salary and accrued vacation and/or sick time to comply with state law. If you sell stock/LLC interests, then the Buyer will assume your obligations to those employees and your obligations under your employee benefit plans.

Manufacturer Approval

Once the purchase agreement is signed and submitted to the manufacturer for approval, the Buyer will need to submit business and personal financial information to the manufacturer. Also, the Buyer will have to submit an Application for a Dealer License to the Louisiana Motor Vehicle Commission (“LMVC”). Typically ever deal is contingent upon manufacturer and LMVC approval before the Buyer and Seller can close the deal. What happens if the Buyer is not approved timely? If the Buyer is rejected by the manufacturer, the Seller actually has standing to file a complaint with the LMVC.

Critical Issues When Selling a Dealership

The last 12 months have been an active time for Buyers and Sellers of automobile dealerships. In my experience of representing almost 50 dealers buying or selling a dealership, I have noticed that most deals boil down to a few critical issues. Hiring an attorney to guide you through these issues and the best way to structure the deal is very important. The following items are some of the main issues you should consider when selling a dealership:

Selling Assets or Stock/LLC Interests

Typically, it would be beneficial from a tax standpoint for a Seller to sell stock or LLC interests. However, most Buyers want to purchase assets because they can re-depreciate the assets and they can protect themselves from the Seller’s liabilities that they don’t specifically assume. So typically a Seller will want to ask for a higher price if the Buyer wants to purchase assets so that after taxes, the Seller is in a similar position. Typically a Seller wants to know what money is he or she going to put in his or her pocket after taxes.

Purchase or Lease the Land and Building

Does the Seller want to sell the land and building to the Buyer, or does the Seller want to be a landlord? If the Seller is going to sell the property, can the Buyer deliver clean title and are there any environmental problems? Are there any issues with the building that the Seller will need to either fix before the closing or reduce the purchase price?

If the Seller wants to lease the land and building: What is the primary term? Does the Seller want to grant renewal options? What is the monthly rent? What are the rent increases during the primary term or renewal terms? What is the Seller responsible for under the lease? Most leases are “triple net” meaning the tenant is responsible for the taxes, insurance and maintenance of the building.

Indemnifications

Indemnifications are important to protect both the Buyer and the Seller. A Buyer wants as many representations and warranties as possible from Seller and wants the indemnity period to last as long as possible. A Seller wants as few representations and warranties as possible and wants as short an indemnity period as possible.

Employees

If you are a Seller and you sell assets, you will have to terminate your employees on the day immediately prior to the closing date and pay them all of their salary and accrued vacation and/or sick time to comply with state law. If you sell stock/LLC interests, then the Buyer will assume your obligations to those employees and your obligations under your employee benefit plans.

Manufacturer Approval

Once the purchase agreement is signed and submitted to the manufacturer for approval, the Buyer will need to submit business and personal financial information to the manufacturer. Also, the Buyer will have to submit an Application for a Dealer License to the Louisiana Motor Vehicle Commission (“LMVC”). Typically ever deal is contingent upon manufacturer and LMVC approval before the Buyer and Seller can close the deal. What happens if the Buyer is not approved timely? If the Buyer is rejected by the manufacturer, the Seller actually has standing to file a complaint with the LMVC.

Critical Issues When Selling a Dealership

The last 12 months have been an active time for Buyers and Sellers of automobile dealerships. In my experience of representing almost 50 dealers buying or selling a dealership, I have noticed that most deals boil down to a few critical issues. Hiring an attorney to guide you through these issues and the best way to structure the deal is very important. The following items are some of the main issues you should consider when selling a dealership:

Selling Assets or Stock/LLC Interests

Typically, it would be beneficial from a tax standpoint for a Seller to sell stock or LLC interests. However, most Buyers want to purchase assets because they can re-depreciate the assets and they can protect themselves from the Seller’s liabilities that they don’t specifically assume. So typically a Seller will want to ask for a higher price if the Buyer wants to purchase assets so that after taxes, the Seller is in a similar position. Typically a Seller wants to know what money is he or she going to put in his or her pocket after taxes.

Purchase or Lease the Land and Building

Does the Seller want to sell the land and building to the Buyer, or does the Seller want to be a landlord? If the Seller is going to sell the property, can the Buyer deliver clean title and are there any environmental problems? Are there any issues with the building that the Seller will need to either fix before the closing or reduce the purchase price?

If the Seller wants to lease the land and building: What is the primary term? Does the Seller want to grant renewal options? What is the monthly rent? What are the rent increases during the primary term or renewal terms? What is the Seller responsible for under the lease? Most leases are “triple net” meaning the tenant is responsible for the taxes, insurance and maintenance of the building.

Indemnifications

Indemnifications are important to protect both the Buyer and the Seller. A Buyer wants as many representations and warranties as possible from Seller and wants the indemnity period to last as long as possible. A Seller wants as few representations and warranties as possible and wants as short an indemnity period as possible.

Employees

If you are a Seller and you sell assets, you will have to terminate your employees on the day immediately prior to the closing date and pay them all of their salary and accrued vacation and/or sick time to comply with state law. If you sell stock/LLC interests, then the Buyer will assume your obligations to those employees and your obligations under your employee benefit plans.

Manufacturer Approval

Once the purchase agreement is signed and submitted to the manufacturer for approval, the Buyer will need to submit business and personal financial information to the manufacturer. Also, the Buyer will have to submit an Application for a Dealer License to the Louisiana Motor Vehicle Commission (“LMVC”). Typically ever deal is contingent upon manufacturer and LMVC approval before the Buyer and Seller can close the deal. What happens if the Buyer is not approved timely? If the Buyer is rejected by the manufacturer, the Seller actually has standing to file a complaint with the LMVC.

Critical Issues When Selling a Dealership

The last 12 months have been an active time for Buyers and Sellers of automobile dealerships. In my experience of representing almost 50 dealers buying or selling a dealership, I have noticed that most deals boil down to a few critical issues. Hiring an attorney to guide you through these issues and the best way to structure the deal is very important. The following items are some of the main issues you should consider when selling a dealership:

Selling Assets or Stock/LLC Interests

Typically, it would be beneficial from a tax standpoint for a Seller to sell stock or LLC interests. However, most Buyers want to purchase assets because they can re-depreciate the assets and they can protect themselves from the Seller’s liabilities that they don’t specifically assume. So typically a Seller will want to ask for a higher price if the Buyer wants to purchase assets so that after taxes, the Seller is in a similar position. Typically a Seller wants to know what money is he or she going to put in his or her pocket after taxes.

Purchase or Lease the Land and Building

Does the Seller want to sell the land and building to the Buyer, or does the Seller want to be a landlord? If the Seller is going to sell the property, can the Buyer deliver clean title and are there any environmental problems? Are there any issues with the building that the Seller will need to either fix before the closing or reduce the purchase price?

If the Seller wants to lease the land and building: What is the primary term? Does the Seller want to grant renewal options? What is the monthly rent? What are the rent increases during the primary term or renewal terms? What is the Seller responsible for under the lease? Most leases are “triple net” meaning the tenant is responsible for the taxes, insurance and maintenance of the building.

Indemnifications

Indemnifications are important to protect both the Buyer and the Seller. A Buyer wants as many representations and warranties as possible from Seller and wants the indemnity period to last as long as possible. A Seller wants as few representations and warranties as possible and wants as short an indemnity period as possible.

Employees

If you are a Seller and you sell assets, you will have to terminate your employees on the day immediately prior to the closing date and pay them all of their salary and accrued vacation and/or sick time to comply with state law. If you sell stock/LLC interests, then the Buyer will assume your obligations to those employees and your obligations under your employee benefit plans.

Manufacturer Approval

Once the purchase agreement is signed and submitted to the manufacturer for approval, the Buyer will need to submit business and personal financial information to the manufacturer. Also, the Buyer will have to submit an Application for a Dealer License to the Louisiana Motor Vehicle Commission (“LMVC”). Typically ever deal is contingent upon manufacturer and LMVC approval before the Buyer and Seller can close the deal. What happens if the Buyer is not approved timely? If the Buyer is rejected by the manufacturer, the Seller actually has standing to file a complaint with the LMVC.

Critical Issues When Selling a Dealership

The last 12 months have been an active time for Buyers and Sellers of automobile dealerships. In my experience of representing almost 50 dealers buying or selling a dealership, I have noticed that most deals boil down to a few critical issues. Hiring an attorney to guide you through these issues and the best way to structure the deal is very important. The following items are some of the main issues you should consider when selling a dealership:

Selling Assets or Stock/LLC Interests

Typically, it would be beneficial from a tax standpoint for a Seller to sell stock or LLC interests. However, most Buyers want to purchase assets because they can re-depreciate the assets and they can protect themselves from the Seller’s liabilities that they don’t specifically assume. So typically a Seller will want to ask for a higher price if the Buyer wants to purchase assets so that after taxes, the Seller is in a similar position. Typically a Seller wants to know what money is he or she going to put in his or her pocket after taxes.

Purchase or Lease the Land and Building

Does the Seller want to sell the land and building to the Buyer, or does the Seller want to be a landlord? If the Seller is going to sell the property, can the Buyer deliver clean title and are there any environmental problems? Are there any issues with the building that the Seller will need to either fix before the closing or reduce the purchase price?

If the Seller wants to lease the land and building: What is the primary term? Does the Seller want to grant renewal options? What is the monthly rent? What are the rent increases during the primary term or renewal terms? What is the Seller responsible for under the lease? Most leases are “triple net” meaning the tenant is responsible for the taxes, insurance and maintenance of the building.

Indemnifications

Indemnifications are important to protect both the Buyer and the Seller. A Buyer wants as many representations and warranties as possible from Seller and wants the indemnity period to last as long as possible. A Seller wants as few representations and warranties as possible and wants as short an indemnity period as possible.

Employees

If you are a Seller and you sell assets, you will have to terminate your employees on the day immediately prior to the closing date and pay them all of their salary and accrued vacation and/or sick time to comply with state law. If you sell stock/LLC interests, then the Buyer will assume your obligations to those employees and your obligations under your employee benefit plans.

Manufacturer Approval

Once the purchase agreement is signed and submitted to the manufacturer for approval, the Buyer will need to submit business and personal financial information to the manufacturer. Also, the Buyer will have to submit an Application for a Dealer License to the Louisiana Motor Vehicle Commission (“LMVC”). Typically ever deal is contingent upon manufacturer and LMVC approval before the Buyer and Seller can close the deal. What happens if the Buyer is not approved timely? If the Buyer is rejected by the manufacturer, the Seller actually has standing to file a complaint with the LMVC.

Critical Issues When Selling a Dealership

The last 12 months have been an active time for Buyers and Sellers of automobile dealerships. In my experience of representing almost 50 dealers buying or selling a dealership, I have noticed that most deals boil down to a few critical issues. Hiring an attorney to guide you through these issues and the best way to structure the deal is very important. The following items are some of the main issues you should consider when selling a dealership:

Selling Assets or Stock/LLC Interests

Typically, it would be beneficial from a tax standpoint for a Seller to sell stock or LLC interests. However, most Buyers want to purchase assets because they can re-depreciate the assets and they can protect themselves from the Seller’s liabilities that they don’t specifically assume. So typically a Seller will want to ask for a higher price if the Buyer wants to purchase assets so that after taxes, the Seller is in a similar position. Typically a Seller wants to know what money is he or she going to put in his or her pocket after taxes.

Purchase or Lease the Land and Building

Does the Seller want to sell the land and building to the Buyer, or does the Seller want to be a landlord? If the Seller is going to sell the property, can the Buyer deliver clean title and are there any environmental problems? Are there any issues with the building that the Seller will need to either fix before the closing or reduce the purchase price?

If the Seller wants to lease the land and building: What is the primary term? Does the Seller want to grant renewal options? What is the monthly rent? What are the rent increases during the primary term or renewal terms? What is the Seller responsible for under the lease? Most leases are “triple net” meaning the tenant is responsible for the taxes, insurance and maintenance of the building.

Indemnifications

Indemnifications are important to protect both the Buyer and the Seller. A Buyer wants as many representations and warranties as possible from Seller and wants the indemnity period to last as long as possible. A Seller wants as few representations and warranties as possible and wants as short an indemnity period as possible.

Employees

If you are a Seller and you sell assets, you will have to terminate your employees on the day immediately prior to the closing date and pay them all of their salary and accrued vacation and/or sick time to comply with state law. If you sell stock/LLC interests, then the Buyer will assume your obligations to those employees and your obligations under your employee benefit plans.

Manufacturer Approval

Once the purchase agreement is signed and submitted to the manufacturer for approval, the Buyer will need to submit business and personal financial information to the manufacturer. Also, the Buyer will have to submit an Application for a Dealer License to the Louisiana Motor Vehicle Commission (“LMVC”). Typically ever deal is contingent upon manufacturer and LMVC approval before the Buyer and Seller can close the deal. What happens if the Buyer is not approved timely? If the Buyer is rejected by the manufacturer, the Seller actually has standing to file a complaint with the LMVC.