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Earlier than an exit, founders should get their employment regulation geese in a row

Efficiently promoting a enterprise has a lot to do with timing. For a lot of entrepreneurs, it’s the high-stakes finish recreation the place they money out and reap the rewards of their efforts. At a sure level, when each consumers and sellers are working exhausting to shut the deal, negotiations can transfer in a short time. In case you’re the vendor, this isn’t the time to find unanticipated issues in what you are promoting.

Distressingly typically, these issues are associated to employment. Inattention to employment points can have a big influence on offers — from stopping closings and lowering the deal worth to altering the deal phrases or considerably limiting the pool of potential consumers.

Poor compliance, lack of insurance policies or flawed practices imply potential legal responsibility publicity or costly coverage revisions and worker retraining — all of which might devalue what you are promoting.

Thankfully, such points sometimes might be resolved nicely upfront with slightly forethought and authorized steerage. It’s essential to get your employment geese in a row lengthy earlier than you begin planning your exit.

What follows is an summary of the three fundamental classes of employment points that may derail or delay a sale. For essentially the most half, these assume an asset sale, however might range within the case of a inventory sale.

Compliance

By far essentially the most vital drawback is basic employment regulation compliance. This implies creating sturdy employment insurance policies and practices which can be documented, in place and working lengthy earlier than you pursue a deal. The important thing space is wage and hour points — timekeeping and payroll practices, employee classification points (worker vs. unbiased contractor; exempt vs. non-exempt), meal and relaxation durations, PTO insurance policies and payouts at termination.