8 Practical Steps to Sell Your Business

typers of mergers
https://luanncapital.com/wp-content/uploads/2013/03/typers-of-mergers-150x150.jpgDigg This
Share on Facebook+1Share on LinkedInPin it on PinterestSubmit to redditSubmit to StumbleUponShare on Twitter

Are you looking to sell your business this year? To make the process go smoothly, consider these practical steps from www.nolo.com:

1. Determine a Realistic Price Range

If you price your business too high, you’ll scare away buyers. If you price it too low, you’ll lose out. To figure out a range that’s realistic, you can use one of several methods — and then maybe blend the results. For example, you can base the price on the value of the business’s assets, and add in a sum for the goodwill the business has developed. Or you can see how much comparable businesses in your industry and locale have recently sold for. Or you can use an industry formula (for example, a value based on the number of units sold annually or a multiple of average earnings).

2. Understand the Tax Consequences

Taxes can take a huge bite out of the money you receive for your business. It pays to know just how big that tax bite will be — and to try to lower it, most likely with help from a CPA or other tax expert.

Your tax bill will be influenced by two key factors: How your business is legally set up and — in the case of a corporation or LLC — whether you’re selling the assets or the entity. Sales of all sole proprietorships and almost all partnerships are asset sales. So are the sales of many corporations and LLCs.

3. Look Good for a Sale

The getting-ready process includes not only sprucing up your premises, but getting your numbers in good shape. Consider recasting your tax-return numbers for prospective buyers. This can involve, for example, adding back to your profits discretionary expenses such as medical insurance for you and your family, travel and entertainment, business vehicles, memberships and subscriptions, and salaries and bonuses paid to family members.

In recasting your tax numbers, you’re not deceiving either the IRS or prospective buyers. You’re simply pointing out that the buyer may prefer not to spend money on some of these items in the future.

4. Seek Potential Buyers

If your business is well known, word that it’s for sale may be enough. Or, possibly someone close to you — an employee, a friend, or a customer — could be a prospect. But more likely, you’ll need to reach out to a bigger pool. This often includes putting ads in newspapers and trade publications, and on business-sale websites.

You may want to engage a business broker to reach more buyers, or to keep your plans from going too public too fast. Expect to pay a substantial commission.

5. Negotiate Your Deal

In working out the terms of the sale, some key issues include whether you’ll sell the business entity or just its assets, what assets (like a truck) you want to keep, and how the buyer will pay you (usually, a down payment plus installments).

6. Sign a Sales Agreement

You’ll need to put the deal in writing. Among other things, your agreement should list and value the assets the buyer is purchasing, list any contracts the buyer is assuming, and include protections that assure you’ll get paid the full sale price. If you attempt the first draft of the sales agreement yourself, have it reviewed to make sure you’ve covered all the bases.

7. Plan for the Closing

The closing is the meeting at which you transfer the business to the buyer. To reduce last-minute hassles, make a checklist of all the papers you and the buyer will need to bring — everything from the documents and money associated with the transfer to your alarm codes, keys, and customer lists.

8. File Paperwork with the IRS

After the sale, you and the buyer need to jointly complete IRS Form 8594, Asset Acquisition Statement and file it with your tax returns for the year of sale.

Connect With Us: Facebook - Twitter - LinkedIn - Google +

Leave a Reply

Your email address will not be published. Required fields are marked *


HTML tags are not allowed.