Close the Transaction
When the closing occurs, you and the seller can either physically meet or handle the transaction virtually. Most closings are now handled virtually.
Wire Transfer Only
Closing funds must generally be made by wire transfer only, to avoid any delays. Certified and cashier’s checks are generally not accepted.
Transferring Funds to Escrow
If escrow is being used, you should transfer the balance of the purchase price to the escrow company three days prior to closing.
Wire Transfer Delays
There are often delays with wire transfers, which can slow a sale if the transfer is made on the day of closing. To prevent this, we suggest wiring the money to escrow at least three days before closing. Certified and cashier’s checks are not accepted due to the recent increase in fraudulent cashier’s checks.
The Purpose of Escrow
An escrow agent serves as a neutral third party that independently protects the interests of both parties. An escrow agent is impartial, acting only on mutually agreed-upon instructions. Escrow agents ensure a seller transfers clear title to the assets, and they often hold substantial sums of money during various phases of a transaction. It’s critical these funds are held by an independent, objective third party, to ensure there are no additional encumbrances against the business and that both you and the seller are in agreement prior to releasing funds.
The escrow fee is normally split 50/50 between the seller and the buyer.
Physical closings can be handled at the business, at an escrow firm, or your attorney’s office. For virtual closings, the documents are signed electronically or “overnighted” to the parties for signatures and are then sent back to the escrow agent, who releases the funds to the seller at closing.
The closing date is a suggested target and is not set in stone. We recommend you be prepared to change the closing date to meet unexpected changes in circumstances.
We recommend that all officers sign the closing documents. If all officers aren’t available, a corporate resolution can be used in lieu of a physical signature.
Transfer of Vehicles and Other Titled Assets
- Asset Sales: The parties should list all vehicles and titled property included in the asset list, which will be attached to the purchase agreement. When the parties sign the Bill of Sale, legal ownership of all property in the asset list, including any vehicles listed, transfers from seller to buyer. While you gain legal ownership of the vehicle at the moment of signing the Bill of Sale, the parties must still arrange for the registration of the transfer with the Department of Motor Vehicles, which may happen days or weeks later.
- Stock Sales: For stock sales, legal ownership of all property transfers from seller to buyer when the stock certificates are handed over, if the assets are owned by the seller’s entity. If the assets are owned by the seller as an individual, they must be separately transferred.
Dealing with Last-Minute Problems
The sale or purchase of a business never goes as smoothly as expected. Problems almost always remain post-closing, too. For this reason, it’s best to maintain an excellent working relationship with the seller so you can easily cooperate to solve such problems.