When it comes to selling your business, you want to maximise your return and sell in the best way possible.
Here are 10 things you need to consider when selling a business.
1) Corporate finance advice
Anybody selling their business could benefit from corporate finance advice. Rarely does a single offer, particularly an unsolicited offer, produce the best value; it can be much more effective to create an auction situation with the buyer pressure that brings. Orchestrating that environment takes experience and skill.
2) Why are you selling?
The vendor needs to be clear on why he is selling; can they support themselves to the same extent in the future? For example, if an individual can earn a 5 per cent return on £5m of proceeds, how does that compare to the income that they are taking from the business.
3) Establish a plan of action
Establish a skeleton ‘master plan’ right from the start. This plan should clearly summarise the expected financial and tax consequences for everyone involved before any pressure from the ‘deal’ arises and judgment is clouded. Capturing these expectations at the earliest stage is invaluable as the ‘deal’ will inevitably morph as it progresses to completion. Understanding the impact of those changes for the different parties can be made transparent through the real-time updating of the ‘master plan’.
4) Set up a trust
If an individual wants value is to cascade to future generations then it is important to consider how to do this before the deal is completed. A discretionary trust is one method to consider as the shares in the company may qualify for 100% Business Property Relief (BPR) in which case unlimited value can be passed into trust for the next generation or widows and widowers.
5) Plan for inheritance tax
It should be noted that while the existing company shares should be protected from inheritance tax (IHT) by BPR only 50 per cent of the value of property held outside a company is protected. As soon as the company is sold both the sale proceeds and the property value are exposed to future IHT issues so either insurance protection or IHT planning will be necessary. From age 60, pragmatically, it may be that insurance is the more flexible option although IHT planning needs to be firmly on the agenda.
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