Should the Buyer Take Over the Business Before Closing?
The answer is a resounding NO! Confusion and misunderstandings often occur if the soon-to-be new owner takes over or works in the business before closing. In our experience this has never been a winning scenario.
There are times when the buyer and seller think it would be a great idea if the buyer began operation of the business prior to the closing of the sale. Why? Here are some typical reasons:
- The buyer needs the income.
- The seller has really “had it.”
- The time it takes to close a deal has been excessively long.
- The seller is in poor health and can’t operate the business (or something similar.)
- The buyer feels the business is deteriorating and wants to get in before it all goes too far downhill.
These sound reasonable because both the seller and the buyer have a shared goal – to maintain the business and transfer ownership successfully. In analyzing the reasons for early possession, does the end justify the means? The answer is a resounding NO. Sellers, who often are as enthusiastic about early possession as the buyer, should remember that the sale has not closed and the buyer may still have second thoughts. Early possession of almost any business can create a real obstacle to a closing. It makes good business sense to let the early possession “idea” remain just that — an idea and nothing more.