Performance based note


You must be logged in to reply to this topic.

Viewing 4 posts - 1 through 4 (of 4 total)
  • Posts
  • Has anyone sold anything on a performance note?
    I am thinking about selling a business on a PBN with the following terms.
    10 year term for 50% of the profits then 25% for the next 5. Does anyone have any language example for this type of note?
    Thanks in advance

    John in Frisco

    .
    John, I’m thinking that one of the greatest risks might be that your buyer has some undefined incentive to under-report whatever varying profits that will be made. Different types of businesses offer different kinds of opportunities for such under-reporting. (As an example, the movie, recordings, and entertainment industry is notorious for finding such ways in order to skin their performers.)

    I don’t know what kind of business you’re considering selling, nor is it any of my business. Whatever level of under-reporting opportunity risk there might be in your line of business needs to be matched in the language of your performance note by a required auditing process sufficient to protect your interest. Skinning the IRS is one thing; skinning you would become very personal. Failure to execute that risk-commensurate level of diligent auditing should have severe consequences — in your favor.

    –Dee

    .

    Thanks Dee,
    In this situation I am not worried about that particular risk. Thank you for the response.

    John

    John
    Think you are going to craft this note yourself.

Viewing 4 posts - 1 through 4 (of 4 total)

You must be logged in to reply to this topic.