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If you run a cigar business, you already understand how much additional scrutiny you’re under as part of your everyday operations. This scrutiny extends to sales and ownership transfers, so it pays to cross your t’s and dot your i’s if one of these events is on your horizon. Here’s how to make the process smoother.
DO: Conduct a Comprehensive Valuation
Before you can even consider a sale or transfer, you have to know your business’s value. In the cigar industry, a business’s value derives from its inventory, existing operations, property, customer loyalty, proprietary blends, and brand reputation.
DO: Ensure Regulatory Compliance
Cigar and tobacco sales are subject to heavy regulation, particularly from the FDA. Non-compliance can stall a sale or result in fines, so DO ask a qualified business attorney to conduct a thorough review to make sure the business meets all local, state, and federal rules and regulations.
DO: Communicate with The People Who Matter Most
Employees, suppliers, and loyal customers should be informed of your plans and progress every step of the way. Maintaining transparency and proactively communicating should reduce uncertainty, prevent disruptions in operations, and limit the financial fallout of any sale or transfer of ownership.
DON’T: Neglect Due Diligence on the Buyer
Not every buyer is suited for the heavily regulated cigar industry. Before committing to the sale, you should feel confident that buyers can adhere to existing industry standards and meet the financial demands of running every aspect of your cigar business.
DON’T: Overlook Tax Implications
The sale of a cigar business can trigger significant capital gains taxes, which vary depending on how the deal is structured (asset sale vs. stock sale).
DON’T: Rush the Legal Agreements
Take the time to create detailed agreements regarding tobacco inventory, branding, and customer relations. Doing so will help you avoid the disputes common in the industry down the road.
Venerable Law can help you avoid the pitfalls and potholes along the path of selling or transferring the ownership of a cigar business. Call us at 813-680-4530 or send us a message online to learn more.
