Published on: April 17, 2017
Are you ready to retire and travel the world, or have your children take over the family business? There are many reasons that people decide to transfer ownership of their business. A trusted advisor can help you decide which option is the best for you and ensure that the transfer is smooth sailing.
Where do I begin?
Plan your exit strategy ahead of time. When you’re ready to sell or close your business, having a plan for the succession or transfer of ownership will not only benefit you, your family, business partners and employees; it will also help to create stability if unexpected circumstances like financial hardship, injury, disability or death occur. A business succession plan is often included in estate planning for this very reason.
Most business owners have several options when it comes to transferring ownership. There are several ways to do this:
Selling your business outright is the best way to make a quick exit and get cash. When you sell a business in full, ownership is transferred immediately and you receive payment for your assets right away.
A gradual sale is a flexible option that is useful when selling your business to partners or employees. After transferring business ownership, you no longer have to worry about running the business but will still receive a monthly income from the sale. This option benefits buyers who cannot afford an outright sale but are able to finance a long-term payment plan.
If you want to take a leave of absence from your business, a lease agreement will allow you to transfer ownership for a set amount of time. When you transfer business ownership through a lease, you commit to a contract that outlines its conditions and the payments you’ll receive during the time someone else has rights to the business.
Transferring a Family Business
Again, proactive succession planning can ensure a smooth transfer of your business to family members. Tax implications such as estate and gift taxes can often arise. Seeking the counsel of knowledgeable lawyers will help to ensure all bases are covered to your benefit and the benefit of your successors.
Creating a Sales Agreement
One of the keys to a successful sale of your business is a well-crafted sales agreement. It is important that the agreement contains all the terms of the purchase. Have your contract lawyer create an agreement that includes the specifics of everything you intend to sell, which can include assets, customer lists and intellectual property. The agreement will also outline any contingencies or conditions that must be met to complete the sale.
Type of Business
Your type of business will affect the steps that are required to transfer ownership. The tax implications of your transfer will differ as well. Rules for sole proprietors, partnerships, LLCs, and corporations require different actions that are specific to the circumstances of the transfer.
Whatever your final decision may be, Carosella & Associates’ knowledgeable, experienced lawyers in West Chester, PA can help to make the transfer of ownership of your business a straightforward and low-stress process, allowing you to focus on new endeavors that may lie ahead.