How Do the Wire Transfers Work?
Wire transfers happen on closing day after all documents are signed. Your lawyer coordinates with the buyer's bank to ensure funds are sent to the correct accounts. Expect multiple wires for different recipients (founders, employees, escrow account).
The Wire Transfer Process
Pre-Closing Preparation
Account setup: You'll need to provide wire instructions for where you want your money sent
Multiple accounts: Consider separate accounts for different purposes (personal, taxes, investments)
Bank notifications: Alert your bank about incoming large wire transfers to avoid delays
Verification: Double-check all account numbers, routing numbers, and bank details
Closing Day Coordination
Timing: Wires typically happen after all closing documents are signed
Verification calls: Banks will often call to verify large transfers
Multiple wires: Separate transfers for founders, employee bonuses, escrow funds
Cut-off times: Most banks have daily wire deadlines (usually 3-5 PM)
What Gets Wired Where
To founders: Your portion after escrow, taxes, and fees
To employees: Retention bonuses, option payouts, change-in-control payments
To escrow agent: Held-back funds (typically 10-20% of purchase price)
To service providers: Legal fees, banker fees, other transaction costs
Common Wire Transfer Issues
Delays and Problems
Bank verification: Large transfers trigger additional security checks
International wires: Can take 1-3 business days vs same-day domestic
Cut-off times: Missing deadlines means waiting until next business day
Account holds: Your bank might place holds on large deposits
Risk Management
Fraud protection: Banks have limits on wire amounts and may require in-person verification
Account verification: Wrong account numbers can send money to wrong places
FDIC limits: Consider spreading large amounts across multiple banks
Documentation: Keep records of all wire confirmations and receipts
Tax and Legal Considerations
Tax Withholding
Buyers may be required to withhold taxes on certain payments
Stock option exercises often trigger immediate tax obligations
Consider having tax payments wired directly to appropriate accounts
Escrow Account Setup
Usually managed by a third-party escrow agent (law firm or bank)
Funds earn interest during the escrow period
Clear release conditions should be documented
Best Practices
- Test smaller amounts first: Do a small test wire to verify account details
- Have backup accounts: In case there are issues with your primary account
- Notify your bank: Large deposits can trigger fraud alerts
- Plan for delays: Don't make plans assuming same-day availability
- Keep documentation: Save all wire confirmations and closing statements