Plan ahead for this decision
It might be hard to imagine the day when you might decide to leave your business. But eventually, you will have to come to this decision so it’s beneficial to think about it in advance.
Your business will be reflective of the values you hold so it is important to consider this when deciding to leave.
The first decision to make should be:
Do I sell to someone I know?
If you want your business to continue running in the family, then it will be a natural decision to pass it on to a family member. Or maybe you want to pass it onto a trustworthy friend to give you peace of mind for its future. If you want to stay involved or keep up to date on the goings on, then selling to someone you know is the best option.
However, there are still several factors involved in passing your business on even to a family member so if you are looking for an easier solution than selling to a stranger, you might want to reconsider.
Sometimes relinquishing control to someone you know can be tricky, as you will still have to decide on a price and whether you want to maintain any control of the business.
Also keep in mind that you want to maximise your returns while retaining a positive relationship with your friend/family member which can be a difficult balance to find.
How can I appeal to potential buyers?
Another option would be to build your business up to its best and then reach out to outside buyers so that you can completely move on from the business once the sale is done.
As nice as it is, having an emotional connection to the business isn’t a worthy point to include when you reach out to any external investors. So instead, you must make sure you can prove that it will be a valuable investment to potential buyers.
This includes proving that your business is competent as well as showing what you have achieved so far. Examples of this are:
Tax is a necessary consideration before you decide to sell your business so that you don’t end up paying unnecessary bills after the sale.
To reduce your tax bill, you can do the following things.
Any profits from the transaction will be liable to Capital Gains Tax but you may qualify for Business Asset Disposal Relief, which lowers the rate of CGT that you must pay.
If you do qualify for this, the first £1 million of profits will be eligible for a lowered tax rate of 10 per cent, instead of the usual rate of 20 per cent.
You can reach out to your accountant for advice on how to lower this bill whilst ensuring you’re following the legal requirements of selling your business.
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