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Considering selling a business?

There are many types of businesses. Some are family traditions passed from one generation to the next. Others are entrepreneurial: built from the ground up, and then it’s time to move on to the next project. When an owner is ready to enter the next phase of life, be it for business or personal reasons, there are important factors to consider if you want to sell the business to a new buyer.

You want any transaction to go smoothly, whether you are selling a car or a business. A sale is a good faith agreement that your property (the business) is represented accurately and that you’re also receiving the best value for your investment. You want to leave the business as a successful owner and you want to leave a successful business ready for new growth.

Remember personal needs and business liabilities

Just like selling a car or a home, owners should review a checklist prior to putting a business up for sale. Washington’s Top News may not be a Texas publication, but it recently published a piece that transcends geography in discussing what business owners need to think about before selling.

Their five main points:

  1. Have a plan for the money – Life changes like selling a business can create a busy schedule. Have a plan ready to capitalize on the income.
  2. Have a plan for charitable giving and gifts – An influx of funds often inspires people to donate or save money. Whether planning for a child’s college fund or giving money to a favorite cause, by planning ahead you can maximize tax write-offs and other benefits.
  3. Have a plan for tax increases – A windfall of business income means higher taxes that you likely estimated when planning for the year. You will need liquid funds available for payment.
  4. Remember insurance – If you are entirely removed from business decisions and liability, make sure you update your policies accordingly. This includes personal insurance that might name the business as a beneficiary.
  5. Remember estate plans – Selling a business isn’t exactly the equivalent of a divorce, remarriage or having a child, but it is a significant life change that changes both your financial picture and your responsibilities. As with insurance, make sure to review any estate plans, wills or trusts to reflect your current situation.

Will you continue to benefit?

In addition to these financial tips, it’s especially important to note if you’re maintaining any connection to the business. Will you continue to draw royalties or a salary for your contributions? Will you remain a board member or consultant in any other capacity? Will you collect health insurance or other benefits?

Selling a business does not have to be a clean break. There are many agreements where the seller retains certain benefits. When it concerns employment status and insurance or retirement plans, it’s important that you review these items carefully to avoid future litigation and questions about your role with the organization. By drafting your sale agreement with an experienced attorney, you can protect your interests and establish a firm plan as you move forward.

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