You have worked hard to build your business, and it’s time to reap the rewards! Whether you are preparing to retire, moving to a new industry, or just want to get out while you’re at a high point, you may be considering selling your business. Before you do, here are some important considerations to keep in mind (and for those of us who don’t have our businesses, some insights into how businesses are sold).
What kind of business do you have?
There are plenty of different kinds of businesses, and not just in terms of goods sold or services provided. The way that your business is structured may affect how you proceed in selling it, so you must know which of the 4 main types of businesses you have:
Sole proprietorship- In a sole proprietorship, one person owns an unincorporated business by herself or himself. In a sole proprietorship, all of the big decisions are up to you alone!
Partnership- In a partnership, two or more people do business together. All partners in a partnership must be up-to-date and informed on business decisions, including the decision to sell.
Corporation- A corporation is a legal entity created by individuals, stockholders, or shareholders, to create a profit. There are two types of corporations:
C corporation- A C corporation is taxed separately from its owners. Most corporations are C corporations.
S corporation- In an S corporation, the corporation chooses to pass corporate income, losses, deductions, and credits through to its shareholders. There are special tax advantages to having an S corporation.
Limited liability company (LLC)- A limited liability company, also known as an LLC, is a business entity that helps shield business owners’ assets. The owner of a limited liability company cannot be held personally responsible for its business debts and liabilities.
How much is your business worth?
Another important consideration in the sale of your business is how much your business is worth. You will likely want to hire an appraiser to perform a business valuation. This appraiser will be able to tell you how much your business is worth by looking at the business’s potential for growth, its annual income, where it’s located, goodwill (the business’s reputation), and other factors. This will give you a good idea of how to set a reasonable price for your business.
Who are you selling to?
Perhaps the clearest criterion for choosing a buyer for your business–as is the case with any other type of sale–is who can pay you for it. But you may also want to consider factors such as personal ties to potential buyers. Personal ties to a buyer can be positive or negative, so choose wisely. Your relationship with the buyer may change as a result of the sale.
It is also important to realize that a wise seller is proactive and seeks out potential buyers. Just waiting around for a potential buyer to come find your business, even if your business is exactly what they are looking for, is unlikely to provide you with many options. To maximize your sales price, talk to multiple buyers to see who best fits your criteria for a buyer. Always keep in mind your objectives during this process and select the buyer that suits those objectives the best.
These are only a few key factors to consider when selling your business. The process can be long and complex, and you don’t want to botch a sale because of a small, missed detail. To achieve the best results, you may want to consult with an attorney in addition to a business broker. These professionals can help guide you throughout the process and ensure that the sale is finalized legally and without any loose ends–the perfect closing to a business built well!
When it comes to selling your business, trust the expertise and professionalism of King Law Offices. Contact us today at 888-748-KING (5464) to schedule a consultation. Let us help you achieve a successful business sale and close this chapter of your entrepreneurial journey with confidence.