Buying or Selling a Business in Southeast Wisconsin: Due Diligence and Tax Checklist

Owners in Waukesha County think about sale or acquisition far more often than they talk about it. A health scare, an unexpected offer from a competitor, or a new opportunity in another industry often starts the conversation. When you reach the point where a deal feels real, questions about risk, taxes, and fairness move to the front of your mind. Working with a Waukesha County mergers and acquisitions lawyer who understands local companies and tax issues reduces guesswork and helps you focus on long term goals.

This guide walks through practical steps for owners in Waukesha, New Berlin, Brookfield, Oconomowoc, Pewaukee, Muskego, Menomonee Falls, Hartland, Delafield, and nearby communities. The focus stays on due diligence, deal terms, and tax planning for small and midsize businesses in Southeast Wisconsin.

Start With Goals And Deal Readiness

Before anyone signs a letter of intent, owners in Waukesha County benefit from a short planning phase. Clear goals shape negotiations, documents, and tax structure.

Questions for sellers

1. Why do you want to sell in the next few years
2. Do you prefer a clean exit or a gradual handoff with ongoing involvement
3. What minimum after tax amount would make a sale worthwhile
4. How important is local ownership or protection of employees
5. Are family members or key managers part of the long term plan

Questions for buyers

1. What type of business fits your skills and resources
2. How will you finance an acquisition
3. Do you have a plan for integration of staff, systems, and culture
4. Which risks concern you most, such as customer concentration, key employees, or environmental exposure

Owners in Waukesha County often start this process with accountants and financial advisors. Adding Schober Schober & Mitchell business and taxation counsel for transactions through Schober Schober & Mitchell business and taxation counsel for transactions provides legal and tax aware perspective on timing, price expectations, and structure.

Timeline Overview: First, Middle, Last

Every deal follows its own path, yet most follow a similar arc.

1. Early conversations and information exchange
2. Letter of intent with headline terms
3. Detailed due diligence
4. Negotiation of business sale agreement
5. Financing, third party approvals, and closing conditions
6. Closing and post closing adjustments

Understanding where you stand on this timeline helps you prepare the right documents and questions for each phase.

Letters Of Intent And Key Business Terms

A letter of intent, often called an LOI, sets out main deal points in plain language. Parties use it to see whether a transaction makes sense before drafting a full business sale agreement.

Common items in an LOI

1. Purchase price and how it will be paid
2. Target closing date
3. Structure as asset sale vs stock sale
4. Outline of seller financing or earnout
5. Expected working capital level at closing
6. Exclusivity period where seller agrees not to negotiate with others
7. Key conditions, such as satisfactory due diligence and financing approval

Even when an LOI describes itself as nonbinding, certain provisions often carry binding effect, such as confidentiality, exclusivity, and expense sharing. Input from a Waukesha County mergers and acquisitions lawyer before signing an LOI saves time and reduces disputes later.

Asset Sale Versus Stock Sale

Structure sits near the top of every deal checklist. Buyers and sellers in Southeast Wisconsin often choose between an asset sale vs stock sale, or a similar equity transaction for LLCs.

Asset sale

In an asset sale the buyer purchases selected assets of the company. Examples include equipment, inventory, customer contracts, trade name rights, and sometimes real estate. The existing legal entity stays with the seller, along with any liabilities not expressly assumed.

Stock or equity sale

In a stock sale the buyer purchases ownership interests in the company. The entity, contracts, and liabilities remain in place, with control shifting to the buyer. Customers and employees often notice fewer changes in day to day relationships.

Tax and liability differences between these paths drive much of the negotiation. Buyers often prefer asset deals for flexibility and tax benefits. Sellers often prefer equity deals, especially when long term capital gain treatment applies. Coordinated advice from an experienced Wisconsin business law firm for M&A and tax planning and tax advisors supports an informed choice of structure.

Financial And Legal Due Diligence

Due diligence means a thorough review of information before closing. Buyers use it to confirm price, surface risks, and plan integration. Sellers use it to prepare for buyer questions and reduce surprises.

Financial due diligence checklist

1. Three to five years of financial statements and tax returns
2. Current year interim financials
3. Revenue breakdown by customer, product, and location
4. Aged accounts receivable and payable reports
5. Inventory reports and valuation methods
6. Capital expenditure history and plans
7. Debt schedules and loan agreements

Legal due diligence checklist

1. Organizational documents for corporations and LLCs
2. Minutes and written consents for major decisions
3. Key customer and vendor contracts
4. Leases for offices, plants, and equipment
5. Loan documents and security agreements
6. Employment agreements and independent contractor arrangements
7. Benefit plans and equity incentive documents
8. Intellectual property registrations and licenses
9. Insurance policies and claims history
10. Litigation, audit, or regulatory correspondence

For a family owned manufacturer in Waukesha, preparation often includes clean corporate records, up to date contracts with major customers, and clear documentation for equipment ownership. For a trades contractor in New Berlin buying a smaller crew in Muskego, focus often falls on service agreements, employee files, and safety history.

Working Capital And Purchase Price Adjustments

Purchase price is more than a single number. Buyers and sellers often agree on a price based on a normalized level of working capital, such as cash, receivables, inventory, and payables needed for daily operations.

A working capital adjustment compares actual working capital at closing to a target based on past performance. If actual working capital sits above the target, the seller receives an upward adjustment. If it sits below, the buyer receives a downward adjustment.

Clear formulas, definitions, and sample calculations in the business sale agreement reduce disputes. Local counsel familiar with lending norms in Waukesha, Brookfield, and Racine helps align working capital terms with bank expectations.

Reps, Warranties, Indemnity, And Risk Allocation

Reps and warranties are statements in the business sale agreement where seller and buyer describe the condition of the business and certain legal facts. Examples include statements about financial statements, taxes, contracts, employment matters, intellectual property, and litigation. If a statement turns out to be inaccurate, indemnity provisions describe how the other party receives reimbursement.

Key points in this section of negotiation

1. Scope and detail of reps and warranties
2. Duration of survival periods
3. Caps on total indemnity exposure
4. Baskets or deductibles before claims trigger payment
5. Exclusions for fraud or known issues
6. Use of escrow or holdback for a portion of the purchase price

An experienced Waukesha County mergers and acquisitions lawyer helps tailor these terms for deals in manufacturing, distribution, construction, and professional services, where risk profiles differ.

Earnouts, Seller Financing, And Retention

When buyer and seller have different views of future performance, earnout structures sometimes bridge the gap. An earnout ties part of the price to revenue, profit, or other metrics over a period after closing.

Seller financing appears when sellers agree to receive part of the price over time through a note. This approach supports buyers who have strong operational fit but limited access to bank financing.

Retention agreements cover how key owners or managers remain involved after closing. Common tools include employment agreements, consulting contracts, and equity rollovers.

For example, a services firm in Brookfield adding a Racine based team might use a mix of upfront cash, seller financing, and earnout tied to client retention. Agreements for key professionals would cover duties, compensation, and non competition obligations.

Tax Due Diligence And Purchase Price Allocation

Tax due diligence reviews federal and state filings, tax positions, and exposure for both buyer and seller.

Key tax questions

1. Are all federal and Wisconsin returns filed and paid on time
2. Do sales and use tax records support reported numbers
3. Are there unpaid payroll tax liabilities
4. Do any audits or disputes remain open
5. Does the business operate in other states where tax filings are expected

Purchase price allocation assigns portions of the price to different asset categories. This step affects depreciation and amortization for buyers and gain character for sellers. Thoughtful allocation often improves after tax outcomes for both sides or highlights tradeoffs to negotiate.

Owners in Oconomowoc, Hartland, and Delafield gain an advantage when legal and tax advisors coordinate early on these questions. Waukesha County business attorneys supporting business sales and purchases work with your CPA on structure and allocation so agreements reflect agreed tax planning.

Special Issues For Local Industries

Different industries around Southeast Wisconsin bring different issues to the front of a deal.

Examples include

1. Manufacturers and distributors in Waukesha and New Berlin with complex supply contracts and equipment leases
2. Construction and trades businesses in Muskego and Menomonee Falls with bonding programs and safety records
3. Professional service firms in Brookfield and Pewaukee where goodwill and client relationships make up most of the value
4. Retail and hospitality businesses in Oconomowoc and Delafield where location, lease terms, and seasonal trends matter

Local knowledge of lenders, landlords, regulators, and common contract practices helps your advisor spot risks early and propose realistic solutions.

Practical Timeline Checklist With A Waukesha County Mergers and Acquisitions Lawyer

Use this high level checklist as you prepare for a sale or purchase.

Early stage

1. Clarify goals, timing, and financial needs
2. Clean up financial statements and corporate records
3. Identify key contracts, leases, and licenses
4. Update a written business succession plan for ownership and management
5. Meet with tax and legal advisors to discuss structure and readiness

Middle stage

1. Negotiate and sign a letter of intent LOI with counsel input
2. Prepare and upload due diligence documents to a secure data room
3. Respond to buyer questions and requests in an organized way
4. Work with advisors on business sale agreement, reps and warranties, and schedules
5. Coordinate with lenders, landlords, and key customers on required consents

Closing stage

1. Finalize purchase price allocation and working capital adjustment formulas
2. Confirm closing deliveries, such as executed documents, payoff letters, and lien releases
3. Prepare communication plans for employees, customers, and vendors
4. Confirm post closing roles for owners, including any consulting or employment agreements
5. Update organizational charts, bank signers, and insurance policies after closing

Next Steps For Buyers And Sellers In Waukesha County

Whether you own a family manufacturer in Waukesha, a trades contractor in New Berlin, or a professional services firm in Brookfield, thoughtful preparation sets the stage for a smoother sale or acquisition. Time invested in goal setting, due diligence, deal terms, and tax planning reduces surprises and supports stronger outcomes for both sides.

Start by gathering key documents, reviewing financials, and listing open issues. Then schedule meetings with trusted advisors who know Southeast Wisconsin. When you engage an experienced Wisconsin business law firm for M&A and tax planning such as Schober Schober & Mitchell, you gain support from Waukesha County mergers and acquisitions lawyers who focus on closely held companies, practical risks, and long term tax aware planning for owners across Southeast Wisconsin.