Thinking about Selling Your Business?
Get your business in tip-top shape first
Your business is your pride and joy, as well as a reflection of all your hard work and sweat. And with any luck, you'll someday have an asset that will pay you back for all your efforts. But whether you plan to sell your business now or several years down the road, there are some steps you need to take to get your business in the best position for a strong sale. Entrepreneur.com offers these tips:
Obtain a business valuation
As the owner of your business, you may have a good idea of what your business is worth, but the only way to know for sure is to obtain a business valuation. A business valuation will help you determine your market position as well as the strength and weaknesses of your firm. To find a firm that does business valuations, speak with your accountant and ask for a referral. Make sure to choose a firm that has experience in dealing with your type of business.
Organize your books
Anyone interested in your business will want to carefully review your books to determine income and expenses. Make sure you document all nonoperational expenses.
What other steps can you take? Well, the Small Business Administration (SBA) encourages business owners to make sure their businesses are in tip-top shape. "Just as you might keep your home freshly painted and your lawn neatly trimmed in the run-up to a sale, you will also want to make [sure] your business looks equally attractive to a potential buyer." One way to make your business look better is to have "sustained sales and marketing efforts" that can position you for a quick and profitable sale.
Understand tax implications
As is usually the case when you sell something, there are tax consequences involved with selling a business. As the SBA website highlights, "A CPA or tax expert can help you understand what to expect in this regard but, as a rule, the structure of your business will influence this number. For example most corporations, LLCs, partnerships, and sole proprietorships are asset sales - and the IRS typically treats each of these assets separately for determining gain or loss." You can read more at irs.gov, "Sale of a Business" section.
Know how to close the sale of your business
Besides understanding tax consequences, there are other state and local regulatory measures you will need to take to close the sale of your business. According to sba.gov, these steps include:
- Filing forms with your state for the dissolution or cancellation of a partnership, LLC, or corporation
- Canceling any permits or licenses you hold with your county or state
- Processing your final employee tax forms such as payroll taxes, withholding reports, etc.
- Notifying your local Commissioner of Revenue about your changed business status
It pays more to be prepared
In short, by preparing ahead of time and dressing up your business, you can earn more from a sale and let more of your hard work pay off.