A 60 Second Seller's Guide to the Purchase Agreement: Consulting Agreement

A 60 Second Seller's Guide to the Purchase Agreement: Consulting Agreement

After the purchase is completed, you can wash your hands and move on to retirement, right? In some cases, yes. In others, not necessarily.

 

As the seller, you know all the little details about your business. You have years of experience. The buyer wants to gain access to your knowledge of the business so he or she can profitably run it. Typically, most buyers and sellers choose to include a consulting agreement in the purchase transaction, giving you (the seller) a role in the company post-sale, sharing your knowledge with the buyer.

 

With a consulting agreement, the buyer agrees to compensate you to be available for consultation on various business matters. The buyer will pay you in increments for a specified length of time, and in return, you agree to be available for a set number of hours each “pay period.” For example, for the next 18 months, you get paid on the first of each month to be available for 10 consultation hours that month. Even if you do not get called for consultation, you still get paid for that month. These terms are all negotiable, so make sure you find something that works for both you and the buyer. Payments received by you will be ordinary income so be aware of the tax consequences.



Log In or Register to post comments