One of the most common surprises in a business sale is discovering, late, whose the money in the bank account is. There is no universal rule: it depends entirely on how the deal is structured and defined, and it is one of the things heads of terms should settle rather than leave to the drafting. Owners who assume the cash is theirs, or assume it is included, both get caught, and the correction usually arrives at the worst possible moment in the negotiation.
Why there is no default answer
If the entity itself is being sold, the entity's bank balance goes with it unless the parties agree otherwise. If assets are being sold, the cash usually stays where it is. Around that, deals commonly define a normal level of working capital that the business should carry at completion, with an adjustment either way. Which of these applies is a matter of agreement and of your advisers, not of custom.
The adjustment nobody explains early enough
Where a working capital or cash-free debt-free basis is used, the price agreed in principle is adjusted at completion against an agreed target. That means the number you shook hands on is not necessarily the number that arrives, and the difference can be material. Understanding which basis is proposed, before terms are agreed, is the whole of the protection here.
What a seller can do
Raise it explicitly at heads of terms rather than assuming, and ask your accountant what the adjustment mechanism would mean for your own balance sheet at a likely completion date. Then keep the records that the calculation will draw on, because completion accounts are prepared under time pressure and disputes about them are disputes about evidence. The honest summary is that this is a definitions question wearing the clothes of a money question, and definitions are settled cheaply at heads of terms and expensively at completion. Raising it early costs one conversation and it is the conversation owners most often report wishing they had had sooner.
Questions people ask about what happens to cash when selling a business
Can I take the cash out before completion?
That depends entirely on what has been agreed and on the structure, and doing it unilaterally after terms are set is the kind of thing that damages a deal. It is a question for your accountant and solicitor, before anything is agreed.
What about debt?
Debt is treated alongside cash in most of these mechanisms, and the two are usually defined together. The definitions matter more than the labels.
Does this site advise on the mechanism?
No. It explains that the question exists and must be settled early, because the commonest harm here is an owner who never asked.