Methods of Selling your Business
Okay, you’ve enjoyed a good run and you want to enjoy the fruits of your labour. Selling your business can be one of the most important transactions that you can undertake, so you should be fully aware of your options. There isn’t just one sale type that you can exercise. Each has its own principle and end result. Whether you are selling your business to another business owner hopeful, passing your business onto a private investor or allowing you employees to collectively purchase your operations, there are several options that you can choose from.
The most straightforward option is complete sale. This is where you divest yourself entirely of all holdings and operations and pass them on to a new entity, whether it be another business owner, your employees or an investment firm.
However, as with some business owners, there is still the want to remain involved to a degree. This is where the partial sale type comes into play. This can manifest itself in various forms. For example, you may want to be involved in day-to-day operations, but don’t want the headache of dealing with the books. You can find an individual willing to take over the long-term management while you serve drinks and still retain a percentage of the business profit. As another example, you may want to give away your active participation but act as a silent partner. The variations of this sale type in selling businesses is really up to the negotiation and therefore can be limitless in possibilities. It would be especially prudent for you to enlist the help of a solicitor to ensure that you have clearly defined terms in the sale contract.
There is another sale type that you can take advantage of known as the sale of assets. An example of this sale type would be the sale of intellectual property such as patents or in the case of online services, a customer database. You also have the option of selling your business equipment or inventory to another buyer. This would free up capital and allow you to deal with other costs such as debts and other similar obligations. These types of sales are usually carried out when the business has proven itself to be less than attractive or has gotten into such financial trouble that it is unlikely to recover.
Another sale type that gives more freedom to the purchaser but adds risk to the business owner is a phased payment sale. This is where the business owner agrees to being paid over time. These payments are usually based on profits and the business owner usually stays involved with the business until buy out. Unfortunately if the purchaser is unable to make payments because the business starts to fail, the sale does not complete, and the original owner can be left with the business and be responsible for the accrued debt.
These different sale types are made to create a more attractive selling situation for the potential purchaser, so knowing which one is right for your business is vitally important when selling your business. Therefore it would be recommended to seek the assistance of a professional when determining which type is right for you. It should also be noted that each of these types could affect the tax situation of your sale, so make sure you fully understand what you are getting into before you find that you’ve lost your sale profits to some unanticipated tax.
Selling your business should be a time of celebration or at least relief. Therefore make sure you do your research and enlist the help of professionals so that your transaction goes smoothly without painful and costly incident.
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