There can be a number of considerations for small business owners in regards to their leased business space when contemplating the sale of the business.

For a retail or service business, maintaining continuity of physical presence can be valuable for the business after the sale.  With the loss of the current owner’s personal network that has helped to feed the business, the continuity of physical presence can be one factor to continue to bring in business after the transition.  Do you have quality retail or office space that reflects well on the business and that works well for your staff to complete the work that must be done?  Have you locked in a longer-term lease that will permit the future buyer to continue to reap these benefits, including the benefit of continuity of physical presence, after the sale?  If you can’t say yes to these questions, what ground work can you lay now to increase the value of your physical space to a future buyer and thereby increase the value of your business?

For a manufacturing enterprise, to what degree has the company locked in a longer-term lease for space that is built out to meet the needs of the business now?  To what degree can the space accommodate the needs of the business as it grows?  Again, have you locked in a longer-term lease that will permit the future buyer to continue to reap these benefits after the sale?

Alternatively, in your situation are there one or more reasons why a future buyer might value being able to escape your current lease and move the business?  For example, is it likely that you might sell your business to a competitor who might be apt to consider consolidating operations?

It is not uncommon for a small business owner to own the office, retail or manufacturing space that is then leased to the business.  Do you also plan to sell the property to the buyer when the business is sold?  If not, the lease terms may need to be revisited or formalized when contemplating leasing the space to third party ownership after the business sale.

[Legal advice not only involves an understanding of the law, but the application of the law to a particular set of circumstances or facts.  Typically blog posts are imperfect tools to address the subtlety and exceptions of the law that may apply in particular situations.  As a result, the information in this blog post does not represent legal advice.  If you are in a situation where you need or desire legal advice, we would be happy to help.  Call 608-358-9413 to set-up a no-charge initial consultation.]