SELLING YOUR BUSINESS

The sale process can vary depending on the type of business and where it’s located, but it often involves several steps:

1. Determine the business’s worth. Evaluate the value of the business based on its assets and sales. A small business may be worth several times its yearly sales, but the value can vary depending on the specifics of the situation. You can hire a professional or company to help determine the business’s value if you’re unsure of what to do. Look for someone who has experience evaluating similar businesses and can use that experience to guide the valuation. If you are determining the value on your own, review some of the steps in the process that you will need to complete.
2. Prepare your financial documents. Potential buyers will want to review your business’s records, financial statements and tax returns to get a better understanding of the business’s financial situation and sales history. Make sure all your documents are ready and accurate.
   
3. Find prospective buyers. You may be able to list your business for sale online or in local publications. You could also work with a business broker, a professional who can match sellers with potential buyers in exchange for a cut of the sale price.
4. Get financing in order. Many business buyers will need to take out a loan to buy your business. You may also have to lend the buyer money by allowing the buyer to pay you part of the selling price, plus interest, over time. Seller-financing can be important because it shows the buyer, and the other lenders, that you believe in the business’s future.
5. Negotiate the terms of the sale. As with many transactions, expect the buyer to negotiate the sale price and terms of the agreement. You may want to hire professionals who have managed small business sales before, including an accountant and attorney, to review everything before the final sale.
6. Close the deal. Once you come to an agreement, it’s time to make the sale official by signing the legal contracts that turn over control and ownership to the buyer. These contracts can be difficult to write and understand, and your attorney should likely be involved in this final step.

It may be that you feel confident enough to handle your business sale yourself but if that is not the case at Richardson Swift we have a whole team of expert accountants and tax advisers who are highly-experienced in dealing with all aspects of business sales. See here for further information regarding our Tax Consultancy work.

If you are thinking of selling or acquiring a company/business, we can provide specialist tax advice and support, both leading up to the transaction and through the process itself, working alongside the corporate lawyers.

We adopt a balanced commercial approach, to ensure that the material tax risks are managed and communicated, while being mindful that the deal needs to complete. We can also work alongside your accountant on a “one off” basis to provide the necessary specialist tax input.

Before the transaction

If we are instructed early enough, we can help you by providing a realistic business/share valuation to aid negotiations. We have a lot of experience in this area and can work on a one-off basis with you whilst you retain your relationship with your accountant for the accounts/tax compliance work.

We may be able to advise on planning matters, such as maximising CGT Entrepreneurs Relief, or how an acquisition of a target business could be structured, but this will depend how far in advance we are instructed.

Identify any share option arrangements, Employee Trusts etc that exist, and advise on the issues that will need to be addressed for the transaction to go through and the mechanisms etc. for dealing with these arrangements and managing expectations.

Consider the Inheritance Tax (IHT) implications of a business sale, the post-sale position, and whether any pre-sale IHT planning might be feasible.

During the transaction process

Whether you are selling or acquiring we can support you and the lawyer in reviewing the Sale and Purchase Agreement/Asset Purchase Agreement, Tax Covenant, Tax Warranties (subject to your accountant covering some of the routine points), Loan Note Instruments.

After the transaction

Depending on the structure of the transaction, there may be further advice needed, for example on extracting the cash proceeds from a company, assisting the vendors with tax return preparation for earn-out element of proceeds etc.

Contact Jon Miles on 01225325580 or jm@richardsonswift.co.uk for more information and see our separate guides with more details on some of the above areas here.