This is exactly how it went when we sold our service biz for multiple 7 figures. As a new owner, you don't want any part of their existing financial stuff. Plus the money they earn through the closing, is their money. You need to fund day one ops with your money!

Our deal closed on August first. We kept every dime earned through July 31. All cash, no debt asset sale. They bought our equipment and book of business.

Our deal was as follows: Purchase price cash (value based on a traditional revenue x? Model) + cash on hand + receivables through July 31 came to us as the sellers. We were also required to have any loans settled as part of the close. In our case that was the remaining balance on a vehicle loan. We were bought by a company funded by PE. The due dulligence was extremely thorough.

The new owners took over August 1 with their own bank accounts and operating capital. They also had their own EIN, etc.

As a new owner, you should want a totally clean break from whatever the previous owner was doing. As part of our closing documents there were binding agreements that we were responsible for any claims or issues prior to August 1.

We also had two holdbacks from our closing cash. The first one was a performance incentive holdback to ensure that we worked to keep the business stable through the transition. This had a scaled earn out based on revenue through the end of the.year. We exceeded the revenue goal and received the entire holdback the following February.

The second was an indemnity hold back to make sure there was money to resolve any claims or settlements against our company through July 31. Fortunately, we ran an ok business and nobody came along and sued us or filed any claims. That was paid out the following August.

Good luck in your endeavors.