One of the most common questions business owners ask when preparing to sell their company is: “What happens to the money in my business when I sell?” It sounds like a simple question, but the answer depends on several factors. This includes how the deal is structured, what assets are included, and how you negotiate financial adjustments.

Many owners assume they automatically keep all the cash in their business bank account—or that everything transfers to the buyer. 

Others believe the sale price is the only money they’ll receive. 

In reality, what happens to “business money” during a sale is more complex and depends on whether the transaction is structured as an asset sale or a stock sale. Other factors also influence this aspect.

The First Key Concept: You Don’t Automatically Get All the Money in the Business

One of the biggest misconceptions among business owners is that when they sell their company, they automatically walk away with all the money inside the business. 

But that doesn’t always happen. 

Others mistakenly believe the buyer takes everything by default. Neither assumption is correct.

When you sell a business, “business money” is treated differently depending on the type of sale, what’s included in the deal, and how negotiations are structured. Some funds belong to the seller, some stay with the business, and some are used to settle debts or financial obligations before closing.

Business Funds vs. Sale Proceeds

Before going deeper, it’s critical to understand the difference between:

• Business Funds

Money held inside the business, such as:

• Cash in business bank accounts
  
• Accounts receivable (A/R)
  
• Customer deposits
  
• Inventory value
  
• Prepaid expenses
  
• Operating cash reserves
  

These are operational funds—not automatically part of your personal payout.

• Sale Proceeds

This is the money you receive personally from the buyer at closing after subtracting:

• Debt payoffs
  
• Taxes
  
• Closing costs
  
• Adjustments for working capital or inventory
  

Many owners only focus on the sale price but overlook the financial adjustments that determine their actual take-home profit.

Common Misconceptions Sellers Have

Many business owners enter the sale process with assumptions that can create major problems later:

Misconception #1: “I get to keep everything in the bank.”

Not always. In asset sales you usually do, but in stock sales, the cash often stays with the company.

Misconception #2: “The buyer gets all my cash when they buy the business.”

Incorrect—buyers don’t receive your operational cash unless the deal specifically includes it.

Misconception #3: “The sale price is what I will personally walk away with.”

Debt payoff, taxes, and required working capital adjustments can significantly reduce the seller’s net proceeds.

Misconception #4: “Debts disappear when the business is sold.”

Most debts must be paid off at closing—often directly from the seller’s proceeds.

These misunderstandings often lead to disappointment or disputes if not clarified early in the process.

Asset Sale vs. Stock Sale: How It Determines What Happens to the Money

The single biggest factor that determines what happens to your business money—cash, receivables, payables, deposits, and more—is whether the transaction is structured as an asset sale or a stock sale. These two deal types treat business funds very differently, and misunderstanding the distinction can dramatically affect your final proceeds.

To understand these different sales type, check out this guide on asset sale vs stock sale.

Asset Sale: Seller Usually Keeps the Cash and Most Financial Assets

In an asset sale, the buyer purchases specific assets of the business—not the legal entity itself. This means the seller retains ownership of the corporation or LLC and all financial accounts inside it unless negotiated otherwise.

• Cash in the Business Bank Account

The seller keeps all cash in operating accounts, unless the contract states otherwise.

• Accounts Receivable (A/R)

Sellers typically keep A/R.

• Sometimes they sell A/R at a discount.
  
• Sometimes the buyer collects it and forwards payments to the seller.
  

• Accounts Payable (A/P) and Debts

Sellers remain responsible for A/P and debts because the legal entity continues to exist.

• Inventory

Usually included in the sale at cost or negotiated value.

• Prepaid Expenses

Buyers may reimburse the seller for any prepaid items that benefit them after closing.

Stock Sale: Buyer Acquires the Entire Entity and All Its Money

In a stock sale (or membership interest sale), the buyer purchases the legal entity itself—shares of a corporation or membership units of an LLC. This means everything inside the business transfers automatically.

• Cash in the Business Bank Account

Cash transfers to the buyer, unless specifically excluded.

• Accounts Receivable

A/R also transfers because the business entity continues uninterrupted.

• Accounts Payable and Debts

The buyer assumes these liabilities unless negotiated otherwise.

• Working Capital

Most stock sales require a mutually agreed amount of working capital to remain in the business at closing.

• Prepaid Expenses, Deposits, Credits

These remain with the company and benefit the buyer.

When Exceptions Apply

Regardless of deal structure, buyers and sellers can negotiate how business funds are treated.

Examples of negotiable items:

• Seller keeps a portion of cash even in a stock sale.
  
• Buyer purchases A/R in an asset sale.
  
• Seller pays off A/P even in a stock sale.
  
• Buyer reimburses prepaid expenses.
  

Deal structure sets the default rules—but negotiation allows customization.

What Happens to Cash in the Business Bank Account?

Cash in the business bank account is one of the most important parts of a business sale. Sellers often assume they automatically keep all cash, while buyers often assume they receive it with the business. 

Below is a clear breakdown of what typically happens to cash at closing.

Asset Sales — Sellers Usually Keep All Cash

In an asset sale, the buyer is not purchasing the legal entity. Because the corporation or LLC remains with the seller:

• Cash does NOT transfer to the buyer
  
• The seller withdraws cash before or at closing
  
• The buyer wires the purchase price separately
  

Cash inside the business stays with the seller because the entity—and therefore its bank accounts—remain intact.

What Sellers Typically Keep in an Asset Sale

• Operating cash
  
• Savings or reserve accounts
  
• Merchant processing balances
  
• Unspent customer payments (handled via adjustments)
  

The only exceptions occur if the buyer specifically requests cash as part of working capital, which is uncommon in small business transactions.

Stock Sales — Cash Transfers to the Buyer by Default

In a stock sale, the buyer purchases the entire legal entity. This means everything inside the entity—including cash—transfers automatically unless negotiated otherwise.

What Transfers to the Buyer in a Stock Sale

• Cash in bank accounts
  
• Emergency reserves
  
• PayPal, Stripe, or merchant balances
  
• Deposits and retainers
  
• Petty cash
  

Because the business continues uninterrupted, the buyer simply steps into ownership of all assets and liabilities already inside the company.

How Cash Is Adjusted in Working Capital Negotiations

In mid-sized and larger transactions, the seller must leave a certain amount of working capital in the business to ensure smooth operations post-closing.

This may include:

• Operating cash
  
• Accounts receivable
  
• Inventory
  
• Prepaid expenses
  

Working Capital Adjustment Examples

• If working capital is below the agreed amount → Price reduction
  
• If working capital is above the target → Seller receives additional payment
  

This mechanism prevents either party from being financially disadvantaged.

Pre-Closing Distributions: How Sellers Withdraw Their Cash

Most sellers remove cash from the business before closing through:

• A formal owner distribution
  
• A dividend payment (corporation)
  
• A draw (LLC or sole proprietor)
  
• A transfer to a personal account
  

These distributions must occur before the sale closes and must comply with the purchase agreement.

Special Considerations That Affect Who Gets the Cash

Certain situations affect how cash is handled:

• Customer Deposits or Prepayments

If the business has taken deposits for future work, the buyer usually requires that cash to remain—or demands a reimbursement from the seller.

• Escrowed or Reserved Funds

Merchant processing holds or escrow accounts often cannot be withdrawn before closing.

• Debt Payoffs

Some lenders require cash reserves to remain until loans are officially paid off at closing.

• Partnership or Shareholder Agreements

Other owners may have rights to portion of the cash before distribution.

What Happens to Accounts Receivable, Accounts Payable, and Debts When You Sell Your Business?

Understanding how accounts receivable (A/R), accounts payable (A/P), and business debts are handled in a sale is essential for knowing your true financial outcome. These items determine not only what money the seller keeps but also which obligations the buyer inherits. Treatment varies widely depending on whether the deal is an asset sale or stock sale, and misunderstanding them can lead to disputes or unexpected price adjustments.

Asset Sale: Seller Keeps Both A/R and Debts (A/P)

In an asset sale, the buyer purchases only selected assets—not the legal entity.
This means:

Seller keep₹s the A/R because:

• The seller earned the revenue before closing.
  
• Buyers usually avoid old invoices and collection risk.
  
• A/R is tied to pre-closing performance.
  

How A/R is handled:

• Seller retains and collects outstanding invoices.
  
• Buyer only collects new revenue going forward.
  
• In some cases, buyer collects A/R and forwards payments to the seller for a small fee.
  

Seller also keeps responsibility for A/P and debts because:

• The legal entity remains with the seller.
  
• Buyers expect a “clean” business free of old bills.
  

Debts the seller must settle before or at closing include:

• Vendor bills and A/P
  
• Credit cards
  
• Business loans and credit lines
  
• Equipment financing
  
• Tax liabilities (sales tax, payroll tax, income tax)
  
• Lease obligations up to closing
  

Asset sales are clean for the buyer but require the seller to resolve all liabilities before transferring operations.

Stock Sale: Buyer Receives Both A/R and Assumes Debts

In a stock sale, the buyer acquires the entire entity—including its balance sheet.
This means:

A/R transfers automatically to the buyer:

• Buyer collects all outstanding invoices.
  
• Receivables become part of working capital.
  
• Seller may negotiate adjustments if the receivables are unusually large or old.
  

A/P and debts also transfer automatically:

• Vendor obligations
  
• Business loans
  
• Accrued expenses
  
• Tax liabilities
  

Because the buyer takes on additional risk, stock sales often involve:

• Price discounts
  
• Larger escrows
  
• Stricter due diligence
  
• Negotiations tied to the quality of A/R and liabilities
  

Alternative and Negotiated Scenarios

Regardless of deal structure, A/R and A/P can be customized in the purchase agreement:

For A/R:

• Buyer purchases A/R at a discount (e.g., 90% of value).
  
• Buyer takes only “clean” receivables (younger than 60–90 days).
  
• Payments are split based on when work was completed.
  
• Buyer services A/R on behalf of seller for a fee.
  

For A/P and debts:

• Buyer may assume specific liabilities in exchange for a lower price.
  
• Seller may keep A/P in a stock sale through carve-outs.
  
• Loan payoff may be shared in certain negotiated deals.
  

Flexibility allows both sides to structure a win-win transition.

Summary: Who Gets What?

Handling A/R, A/P, and debts properly ensures a smooth financial transition and prevents costly surprises at closing.

Working Capital, Inventory, and Prepaids: What Stays, What Transfers, and Why It Matters

Working capital, inventory, and prepaid expenses are some of the most misunderstood parts of a business sale. Still, they have the biggest impact on final proceeds. 

What Working Capital Includes (and Why Buyers Care)

Working capital represents the money the business needs to operate smoothly.
It’s calculated as:

Current Assets – Current Liabilities = Working Capital

Current assets typically include:

• Cash (in some deal structures)
  
• Accounts receivable
  
• Inventory
  
• Prepaid expenses
  

Current liabilities typically include:

• Accounts payable
  
• Accrued expenses
  
• Short-term debts
  

Buyers require sufficient working capital so they don’t need to inject cash immediately after closing to pay vendors, buy inventory, or maintain operations.

Working Capital Adjustments: How They Change the Price

Most deals set a working capital target—a baseline amount the business must have at closing.

• Below target → Seller owes buyer money (price reduction)
  
• Above target → Buyer owes seller more (price increase)
  

These adjustments protect both parties and ensure that the buyer receives a functioning business on Day 1.

Common seller mistakes include removing too much cash, letting payables pile up, or ignoring seasonal inventory needs—all of which trigger negative adjustments.

Inventory: What Transfers and How It’s Valued

Inventory is almost always included in the sale because the buyer needs it to generate revenue immediately. This includes:

• Finished goods
  
• Raw materials
  
• Work-in-progress
  
• Packaging and consumables
  

Inventory is usually valued at cost, not retail price. During due diligence, buyers review inventory for:

• Obsolete items
  
• Damaged goods
  
• Overstocks
  
• Seasonal products
  

Unsellable items are either discounted or removed.

In stock sales, inventory transfers automatically; in asset sales, it’s listed and valued separately, and often affects working capital calculations.

Supplies and Consumables

Operational supplies—cleaning materials, office supplies, packaging, minor tools—are generally included at no additional cost unless they have high value. They are treated similar to inventory.

Prepaid Expenses and Deposits: Who Gets the Value?

Prepaid items (rent, insurance, software subscriptions, retainers) provide value after closing, so buyers typically expect to receive that benefit.

Treatment varies by deal type:

Asset Sale

• Buyer reimburses the seller for the unused portion
  
• Amount is prorated based on time/value
  

Stock Sale

• Prepaids stay with the entity
  
• No reimbursement is needed unless unusually large prepayments were made
  

Security deposits also follow the same rule:

• In asset sales, they are negotiable and often reimbursed
  
• In stock sales, they transfer automatically with the entity
  

Vendor credits and rebates typically transfer if tied to ongoing operations.

Customer Deposits and Advance Payments

Customer deposits can be tricky because they represent both money and future work.

Typical treatment:

• Buyer takes responsibility for delivering the work
  
• Buyer keeps the deposit money
  
• Seller may reimburse buyer if the funds were already spent
  

If the seller used deposit funds before performing the service, adjustments are required to avoid unfair burden on the buyer.

Summary: What Transfers vs. What Stays

These items may seem small individually, but together they determine how much money the seller keeps, how secure the buyer feels, and whether the business runs smoothly after the transition.

What Happens to Profits Earned Before Closing?

One of the most important financial questions sellers ask is:

 “Who gets the profits the business earns before the sale closes?”

This section of my guide will help you find the answer:

Profits Earned Before Closing Belong to the Seller

In nearly all transactions, profits earned before the closing date belong to the seller.

This includes:

• Completed work
  
• Revenue billed prior to closing
  
• Revenue earned but not yet invoiced (accrued revenue)
  
• Any cash the company receives for pre-closing work (depending on structure)
  

Why?

Because these profits were generated by the seller’s operations, employees, assets, and risk before the buyer took control.

The challenge lies in determining exactly when the revenue was earned. This is why careful accounting and timing are essential.

How Profits Are Allocated in Asset Sales

In an asset sale, the allocation is usually straightforward:

• Seller keeps profits earned before closing
  
• Buyer keeps profits earned after closing
  
• Any overlap is prorated based on when work was performed
  

Example:

If a service project spans two months and closing occurs in the middle, revenue is divided:

• Seller receives compensation for work completed before closing
  
• Buyer receives revenue for work completed after closing
  

This prevents either party from being unfairly advantaged.

How Profits Are Allocated in Stock Sales

In a stock sale, the buyer purchases the entire entity—so technically, profit before closing now “belongs” to the company they purchased.

However, this does not mean the seller loses that profit.

Typical treatment:

• Profit is reflected in working capital
  
• Seller may take a pre-closing distribution
  
• The sale price may assume historical profitability
  
• Adjustments ensure the buyer does not receive unintended windfalls
  

Stock sales often require more sophisticated accounting because pre-closing profit remains inside the entity unless withdrawn.

How Expenses Are Prorated

Just as profits are allocated, many expenses must be divided between buyer and seller.

Expenses that often require proration include:

• Rent
  
• Utilities
  
• Payroll
  
• Subscriptions
  
• Service contracts
  
• Insurance premiums
  
• Maintenance fees
  

Example:

If rent is paid monthly and closing occurs on the 10th:

• Seller pays rent for days 1–10
  
• Buyer reimburses the seller for days 11–30
  

Proration prevents accidental overpayment by either party.

Summary: Who Gets Pre-Closing Profit?

Ultimately, profit belongs to the party who generated it, not simply to the one who received the cash.

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