Tips for Selling Your Business

Tips for Selling Your Business

The decision to sell a business usually comes after a long period of deliberation. Sometimes, it’s a case of owner-burnout, where running the enterprise no longer brings satisfaction. In other cases, it may not be feasible to continue operating – even if the company is still functioning.

Regardless of the reasons why, choosing to sell a business involves aspects of business and tax law beyond the everyday experience of most owners. Even with legal consultation, there are certain points every owner should know before they start the sale of their business.

Planning Ahead

Selling a business can take anywhere from two to four years. Most of this time is spent finding a market, finding a buyer, and negotiating the terms of sale. As a result, it’s never too early to begin your research once the decision is made.

One of the first assessments a prospective seller should consider, however, is whether their business can be sold at all. A poor performance record may turn away potential buyers, so it’s worth reviewing revenue, expenses, and any other competitive advantages a business may possess.

Once the process starts, it’s vital that all necessary information be available. This means gathering all relevant information and paperwork, such as:

  • Three years of profit & loss, and balance sheets
  • Tax returns
  • Asset list and valuation
  • YTD profit & loss

Buyers need to see this information if they are to make an informed decision. Not having quick access to these documents can slow the process further, and potentially turn away interested parties.

Picking a Price

The goal of a sale is to make money – preferably as much as possible. At the same time, however, how an owner values their business is not necessarily the same as how much a buyer is willing to pay. This is where documentation can save a sale – as it clearly shows the buyer how valuable the new asset can be.

An unprofitable business can still sell, perhaps not for as much, but there is certainly a market for so-called going-out-of-business sales. Do not undervalue your business when it comes time to sell, as buyers may see a more valuable resource than one might think.

Understanding the Tax Burden

Business sales have clear tax ramifications that need to be understood before an agreement is signed. Once a sale is complete, for example, both buyer and seller need to file IRS Form 8594. The type of business plays a key role in determining the tax liability for a sale, and this financial burden should be clear before a sale goes through.

If you are a business owner looking to sell in the Dallas area, the attorneys at Bennett, Weston, LaJone, Turner P.C. have nearly three decades of total experience in business law and commercial transactions law Bennett Weston can assist with all phases of the sale of your business, from the determination of a value to drafting contracts and agreements to negotiations with potential buyers.

2018-08-02T11:57:01+00:00 July 30th, 2018|Business Formation, Business Law, Business Planning|