Closing the Business Sale
In the context of the sale of a business, the "closing" is the point in time at which all necessary documents are signed by all the parties, apportionment of expenses up to the date of closing is done, money and keys are exchanged, and the buyer becomes the new owner of the business.
Sometimes the closing occurs on a particular day, when the parties meet with their respective lawyers to sign all the documents in each other's presence. In other situations, an escrow agent is used. Each party signs the necessary documents as they become available, and forwards them to the escrow agent over a period of days or weeks. When the agent has everything from both parties, he or she will release the funds to the seller and the deal is "closed." Whether an escrow agent or a closing ceremony is used really depends on the custom in the geographic locality, and the preference of the lawyers involved.
Immediately prior to closing, the buyer may want to do a "walk through" to be sure all the equipment and inventory listed in the purchase agreement is still there. Because accidents happen and inventory gets sold or broken, an owner should be prepared to do a bit of last-minute adjusting to the purchase price.
After the Sale: What Now?
After the sale of a business is completed, the first thing an owner should probably do is take a well-deserved vacation!
The process of selling a business can be very hectic. The owner probably put a lot of work and many late nights and evenings into gathering and presenting information about their business, schmoozing with potential buyers, and negotiating the terms of the deal while at the same time trying to keep the business running with at least a semblance of normalcy. After the close the deal, the exhaustion will probably hit, as well as the emotional impact of having to let go of their company. It may be a good idea for an owner to leave town for a while, so they can avoid seeing their "baby" in the hands of a new owner, at least until they have some time to adjust to the change.
An owner may continue to be tied to the former business for a few years, if they've agreed to stay on as a consultant or employee, or if the new owner still owes them money. But chances are they'll be much less involved in the day-to-day routine, and more concerned with strategy and long-term direction. And even this involvement is likely to be fairly short-lived, as the new owner begins to feel more comfortable and anxious to make his or her mark on the business.
Most of the former owner’s attention will turn to the best way to put the proceeds of the sale to work. They'll probably want to schedule a meeting with their attorney and financial planner to determine whether there are any creative ways to structure their holdings. For example, if their former business was incorporated and the assets were sold, they may be able to use the corporate "shell" to shelter revenues with a new defined-benefit retirement plan (the old corporation may continue to receive income in the form of old accounts receivable, payments on a note from the new owner of a business, or rent from business real estate that was not transferred in the sale). Alternately, the former owner might decide to liquidate the corporation. A trust or family limited partnership may be the best way to shelter some income or transfer it to family members in a way that will minimize income taxes now, and estate taxes later.
If they haven't spent much time learning about investments, now is a good time to do it. If they have a significant amount of money to invest they'll probably want to seek the help of a professional advisor, at least in the beginning. But that doesn't mean they should avoid learning as much as they possibly can about the world of finance.
Finally, many former business owners who've successfully sold their companies find that they miss the challenges and risks that go along with being an entrepreneur. Many have found that they can scratch that itch, and at the same time achieve a good return on capital, by investing in other small businesses in their town or region. Becoming a business angel who can come to the aid of younger entrepreneurs with both money and expertise can be the perfect solution to the question of "what do I do now?"