No matter what the reason you may have for wanting to sell your business, there are a few things you should keep in mind about the different options you have when it comes to transfer of ownership.
What type of business is it?
As with all other legal matters concerning your business, the type of business you own is central to making the right decision on how to transfer ownership. A partnership requires a different process than an LLC or a corporation as well as different tax procedures and implications. So before going any further, seek out sound legal advice on the steps your specific type of business needs to go through to transfer ownership. In almost all cases, there are enough unique situational contexts that speaking with a lawyer an extremely prudent idea.
Is it a family business?
Because of the unique status of family businesses with the IRS and most states, there are often more tax issues and responsibilities associated with a transfer of ownership than with a simple sale. It’s essential to seek out the advice of a business lawyer to ensure things like gift and estate taxes are handled properly to limit liability. Anytime you know you are going to hand off your business to a child or family member when you retire, it is highly recommended to get a business lawyer involved early to begin planning for the succession. A lawyer can help you plan to minimize tax obligations and ensure a hassle-free transfer when it comes time to hand off the family business.
Selling the business outright
Selling a business outright is often the best option when you need cash quickly. Typically a scenario where a business is underperforming and an owner knows they have neither the time nor the resources needed to correct the direction the business is headed would be ideal for an outright sale. It would be prudent to locate a buyer who does have the time and resources needed to help the business and conclude the sale as quickly as possible. In this case, ownership of the business and all assets would transfer immediately upon receiving payments.
Selling the business on a payment plan
Sometimes the buyer, the seller, or both need a bit more flexibility in order to close out a sale. In such cases, a gradual sale remains a strong option. While the day-to-day running of the business would be transferred, the original owner would retain part of the assets that would be paid off on a monthly basis. This provides the advantage to the seller of a continual monthly income without having to work all the time anymore. It also provides the buyer the advantage of being able to get into the business without having to have all the money up front. Every sale is situational, but this remains a strong option for many owners looking to sell.
Using a lease agreement
There are situations where a business owner may need to leave the business for an extended period of time and find it’s best to turn it over to someone else during that absence. In such cases, the owner could lease the business to a new temporary owner. This would provide the seller with income while away from the business while retaining the freedom to return when they are able. To the buyer, this offers a great and inexpensive way to earn income and experience running a business without the long-term commitment most business owners must take on.
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