What Happens to Cash When Selling a Business?

Money can sometimes be a sensitive topic, but when it comes to selling your business, we have to discuss it. At Transworld Business Advisors North Dallas/Ft. Worth, we understand the importance of understanding the role of cash in your business sale. If you're wondering what happens to cash when you sell your business, we're here to provide some clarity.

In most cases, cash does not need to be considered as an asset of the business during a sale. As the business owner, you get to keep any and all cash, as well as cash equivalents, after the sale. This includes bonds, petty cash, and money in bank accounts. Surprisingly, this is often the case even for pass-through entities like S Corporations or LLCs. The buyer typically has their own estimates of working capital and considers the cash generated through profits, which you may have already paid taxes on, or borrowed by the company. As a result, the cash usually remains with the seller.

However, there are instances where cash may play a significant role, such as in businesses that require cash on hand for working capital requirements. Examples include pawn shops, ATM businesses, check cashing stores, or businesses with customer deposits or warranty obligations like catering/event facilities or contractors.

In conclusion, in the vast majority of cases, the cash in the bank belongs to the seller. It's important for sellers to consider this cash as part of their proceeds of sale when planning for net profits after accounting for closing costs and taxes.

Understanding the specific implications for your business and deal structure can be complex. That's why we recommend reaching out to our experienced business brokers at Transworld Business Advisors North Dallas/Ft. Worth. We're here to help you navigate the sale process, assess future income, and understand the tax implications. Contact us today at 469.714.4107 to speak with a member of our team. Whether you're in the Dallas or Ft. Worth area, we're ready to assist you.