In many cases, a business owner will leave after selling their company. For instance, maybe your company is in the process of acquiring a smaller local competitor. You are going to take over their operation, gaining access to their intellectual property, along with their physical assets and employees. As you incorporate these elements into your existing business structure, the other owner takes the money from the sale and moves on.
But it’s also possible for a business owner to stay with the company. Why would they decide to do this after selling the business?
Establishing an employment agreement
The reason for this is often that the business owner wants to know that they will have a stable income and a source of employment. They do want to sell the company, but they’re not making enough money to simply retire, so they still want to remain employed. Perhaps they understand the industry on a deep level, but they are worn out from the day-to-day stresses of running the business. They want someone else to take over at the top while they refocus their efforts.
This should be addressed with an employment agreement. For instance, the terms of the sale may specify that the owner will get to stay with the company for the next five years and will be paid a specific salary. They see this as part of their compensation package.
But it could also be beneficial from your perspective as you buy that company. The other business owner may have valuable insights into the market. They understand exactly how the company operates. They can help create more of a seamless transition as you bring their employees and facilities into your company. This just helps things go smoothly and increases your chances of long-term success after such a significant investment.
When business transactions grow complex, be sure you know what legal steps to take.