Selling an insurance agency can move quickly once a buyer is at the table. But long before negotiations begin, prospective buyers will evaluate how well your internal operations are organized.
Gaps in employment and benefits documentation are among the most common reasons due diligence slows down or purchase terms change. For agency owners considering a sale in the next few years, taking time now to clean up these files can make the transaction smoother and improve buyer confidence.
A well-prepared employment and benefits package signals that your agency operates responsibly and manages compliance risk effectively. It also reduces frantic, last-minute document gathering once diligence begins. Below is a practical checklist of what buyers typically ask for and what agency owners should have ready.
Employee roster and compensation data
Buyers usually start by reviewing who works at the agency, how they are classified, and where they are located.
Prepare a current employee census listing each W-2 employee’s title, work location, compensation details, and whether they are exempt from overtime rules. This helps buyers evaluate potential wage and hour issues and assess the size-related obligations of employee benefits programs.
Independent contractor records
Agencies often use independent agents, producers, or marketing support contractors. Buyers will want a list of anyone treated as a contractor over the past three years, including the services they perform, how much they were paid, and where the work was done. This helps identify potential contractor-versus-employee misclassification risks.
Employment agreements and restrictive covenants
Gather offer letters, employment agreements, confidentiality rules, and any non-compete or non-solicitation agreements you have in place. Buyers will evaluate whether these agreements are enforceable and whether key employees are adequately bound by them.
Bonus, commission, and compensation plans
Buyers also want details about any compensation arrangements that could be triggered by a sale, including retention bonuses, commission plans, severance arrangements, equity or phantom equity awards, stock options, or profit-sharing plans.
These items affect how the sale is priced and whether certain obligations transfer to the buyer. If any employees previously filed 83(b) elections for equity-based compensation, these should be readily accessible.
Employee handbook and workplace policies
Your policies set expectations for compliance and employee conduct. Buyers typically review employee handbooks and any key policies, especially those tied to wage and hour rules, meal and rest breaks, overtime, remote-work procedures and leave programs.
Pending or past employment disputes
Buyers will expect disclosure of any employee-related claims, audits, investigations or disputes within the past three years, even if they were resolved.
Work with counsel to determine how to summarize issues without compromising privileged information.
Section 280G considerations for agency owners
If your sale results in payments to certain owners or executives, you may encounter Section 280G of the tax code, which can impose a 20% excise tax when payouts exceed specific thresholds.
Buyers usually request either a completed 280G analysis or a clear explanation of why the rule does not apply. For privately held agencies, shareholders can sometimes approve the payments to avoid excise tax consequences, but that process requires advance planning and detailed disclosures.
Employee benefits plans and filings
Buyers will review documentation for all benefit programs, including retirement plans, health and welfare benefits, fringe benefits and reimbursement arrangements. Ensure plan documents, annual filings, required notices, and any government correspondence are organized and up to date. If your agency participates in plans run by a PEO or association health plan, understand in advance what it takes to exit those programs if the buyer asks for a transition.
Cap table and equity awards
If you have granted equity, phantom equity, stock options, or profit interests to producers or executives, assemble a clear capitalization table showing award types, grant dates, vesting schedules, and approval documentation. Buyers will check that all awards were properly authorized and valued.
Managing confidentiality
For many agency owners, one of the biggest concerns is maintaining confidentiality while preparing these materials. Work with legal counsel to determine how to gather and store documents without signaling to employees or vendors that a sale is underway.
Why early preparation matters
While this list covers the basics, there may be other documentation that a buyer will want to see when purchasing your agency.
But addressing the above in advance minimizes surprises and reduces the risk of delays once a buyer begins diligence. Many agency owners find that starting the process 12 to 24 months before they plan to sell gives them enough time to resolve issues quietly and present their operation in the best light.
