Selling your business for shares or cash
How you sell your business will have an impact on the price you
get for it. You could sell for cash but it's the least
tax-efficient option. You might be offered a deferred payment deal,
which will tie you in to the business, or you might be offered
shares in the company buying you. This guide outlines the various
options.
- Planning
- What options are on the table?
- Buyouts
- Tax implications
Planning
Before you go into the sales process, you should have an idea of
the price you're looking for - some sort of target or minimum. Also
think about whether you want to be involved with the business after
you sell it since some deals with stipulate that as a condition.
You will want to minimize your tax liabilities regardless, so get
an accountant on board early on - and preferably someone with
experience of business sales. Consider forthcoming tax changes and
bear in mind macro economic conditions.
What options are on the table?
The first thing to consider is whether the buyer really can
afford to pay for your business. Any offer needs to be properly
financed. Ask for proof of financial backing - this could include
mortgage or loan agreements, share certificates or evidence of
personal savings. You then need to find out what form payment will
take. Cash is tax inefficient, deferred payments will be linked to
future sales and may require your involvement. If shares in the
buying company are offered, only take them if the business is
quoted.
- Finance in place?
- Cash or shares?
- Deferred payment
Buyouts
A buyout is where you sell the business to senior managers or
employees. It's a common arrangement but the deal you get might not
be as attractive as selling to another business. Selling to people
who have previously worked for you could be awkward if negotiations
drag on or get stuck on price or shares or equity issues. All sides
need independent advice and a strong constitution.
- Selling to managers
- Price lower
- Advisors important
Tax implications
If you sell a business you must pay Capital Gains Tax on its
sale. There are ways to minimize liabilities and it is worth
talking to advisors to see how and to take advantage of any tax
relief available. With rules set in advance, be aware of
forthcoming legislation and any deadlines that may bring with
it.
- Capital Gains Tax
- Tax relief
- Upcoming legislation
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