Selling your business after putting years of hard work into it is a big decision. Whether you’re planning for retirement, motivated by financial reasons, or selling as part of a broader strategy, to achieve the best financial outcome you must plan in advance to ensure the best for you. To achieve the best financial outcome, you must structure the sale of your business appropriately to reduce your tax liability. You also need to understand your company’s value, so you do not settle for less than your business is worth.        

Reasons to Sell a Business

The first question you should ask yourself is why you’re selling your business. A buyer will probably want to know your reason, and you must be prepared to give them an honest answer. Selling a business is a decision that must not be taken lightly or rushed into. Are you retiring or no longer able to run the business due to illness? Have you become bored with the current venture and are seeking a new one? Are partnership disputes impacting the company’s operations? 

Although owners sometimes decide to sell a business if it is not generating the expected profits, this deficit can make selling a business more difficult to find a buyer. If so, you should not lie about your reason for selling — a buyer will discover any discrepancies during the due diligence process. Misrepresenting your company’s financial data can do more than just jeopardize a deal and tarnish your reputation— misrepresentation may also result in legal consequences.

Selling a Business: Important Considerations

Selling a business requires careful planning and a solid understanding of your goals. Prepare a year or two in advance once you’ve decided to sell your business. This preparation will help you improve your finances and customer base to increase the value of your company and make it more attractive to buyers. Improving the business and its operational systems will also help ease the transition for the buyer and ensure a higher return on your investment.  

Several factors to consider when selling your business include:

• The structure of the sale — A sale of the business can be structured in several ways.. A business can be sold by asset sale or share sale. While an asset sale involves selling specific assets and liabilities, a share sale sells the entire company, as well as all known and unknown liabilities. 
• The value of your business — When selling a business, you must consider the value, including its assets, revenue, inventory, profits, intellectual property, customers, and goodwill.
• The timing of the sale — Timing is everything if you’re thinking about selling your business. Consider the current market conditions, the company’s financial health, industry trends, and whether active buyers may be interested in businesses such as yours.
• The tax implications of selling your business — It’s important to be aware of the tax liabilities that can come with selling your business. You may be subject to capital gains taxes and other taxes. Certain business transactions can be structured as an installment sale to spread tax liability over several years.       
• Finding the right buyer — Finding the right buyer is about more than accepting the highest offer for your business. Consider their ability to finance the purchase and whether they are motivated. Screening potential buyers can save you time, money, and energy that would be spent on negotiations, only to find out they aren’t serious or don’t have qualifications.   

Consider using non-disclosure agreements to safeguard any sensitive information when negotiating selling your business. Assemble a team of professional advisors to help you achieve the best results. Your team should include a business law attorney who can provide counsel and negotiate on your behalf; a broker who can help to market selling your business; and an accountant or financial advisor who can help ensure the best financial outcome.    

Contact an Experienced New York Business Attorney

Selling a business can be legally and financially complex. It’s critical to have an experienced business attorney who can best advise you regarding the legal and tax implications — and help you secure the best deal possible. Offering trusted representation and high-quality legal services to entrepreneurs and corporate owners, Brinen & Associates advises clients regarding many business matters. Call (212) 330-8151 or send us a message to learn more about how we can help you.