Can the seller stay involved after an SBA-financed sale?
Short answer
It depends on the deal. After an Initial Acquisition or Business Expansion, the seller must exit and can only consult for up to 24 months. In a Partial Owner Buyout or controlling ESOP or cooperative purchase, the seller may stay. Source: SOP 50 10 8.1, App. 15, Para. A.
In this answer, ESOP means employee stock ownership plan.
Sometimes, depending on the transaction category. SOP 50 10 8.1, Appendix 15, Para. A, draws the line.
Initial Acquisition and Business Expansion
The seller may not remain as an officer, director, stockholder or employee. If the business needs a transition, it may contract with the seller as a consultant. That period cannot exceed 24 months in aggregate, including any extensions.
Partial Owner Buyout
The seller may stay on as an owner, officer, director, stockholder, Key Employee or employee (Para. A.1.c.ii). A selling owner who keeps less than 20% still gives a guaranty for at least two years.
ESOP or cooperative controlling purchase
When an employee stock ownership plan (ESOP), equivalent trust or cooperative acquires 51% or more, the seller may stay in those roles. A seller who remains a partial owner in an ESOP deal must give a full, unlimited guarantee (Section A, Ch. 2, Para. B).
A 504 sale
On a 504 sale, the seller may not remain as an officer, director, stockholder or Key Employee (Section C, Ch. 1, Para. C.13). That paragraph states no consulting exception.
Check the purchase agreement against these limits before signing.
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