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How to Buy a Business: Those danged broker commissions

Over the last six hours or so, I have come across three different posts on buying a business where someone either asked or insisted that the seller pay the broker’s commission.

Now does the seller really pay the broker’s commissions?

Or is it someone else?

As with most things in life, to arrive at the truth you simply follow the money.

So, how does the money flow in a business sale?

On closing day the buyer cuts a big check and gives it to seller.

The seller then cuts a check for the broker’s commission.*

So, who really pays for the broker’s commission?

* Technically speaking, an escrow agent takes the buyer’s check and cuts smaller checks for seller, broker, and himself, but I left that detail out so as not to muddy the waters.

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