Selling Your Business - Structuring Earnouts and Deferred Payment Plans

This free article will steer you through the issues to consider if the sale of your business has an earn-out component or a deferred payment (seller financing) option.

Key Issues

This article covers a number of issues that must be considered, including:

  • determining a fair price,
  • negotiating reasonable terms and interest rate,
  • determining the amount of money the buyer will put in at the outset,
  • securing the unpaid balance of the purchase price,
  • considering rights of setoff,
  • setting payment milestones, and the consequences for missing a milestone,
  • dealing with financial needs and operational decisions of the business until the purchase price has been paid in full.

Risk Management Strategies for Problems Arising After Closing

The writer also touches on how you should address potential problems that could arise after the closing, such as:

  • Death of either party
  • Default
  • Insolvency of either party. 

Planning Your Exit Strategy

The information provided in this article is intended to help small business owners exit from their businesses through a carefully structured seller-financed or earn-out sale arrangement.

Author Credit

This article was written by Phil Thompson, business lawyer and corporate counsel in Ontario, Canada.

Document Type: Adobe PDF
Last Updated: 22-October-2025
SKU: 5851
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