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Selling Up and Moving On; Preparation Tips for Making Your Business Sale a Success

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Selling Up and Moving On; Preparation Tips for Making Your Business Sale a Success

By Caron_Beesley, Contributor
Published: March 23, 2010

Whether you've reached the end of the road as a business owner and are looking to move on, or have reached the point where you can 'cash-out' and reap significant rewards from a business sale, the process of selling a business can be almost as tricky to navigate as starting your dream business was in the first place.

In addition to knowing when to sell, there are many decisions to be made and obligations to be met - from structuring your sale, to finding a buyer, managing regulatory ties and commitments, inventorying assets, transferring ownership, and so on.

Below are some tips and resources to help you understand some of the key aspects of getting your business ready for sale.

Preparing for a Business Sale - Make Sure your Business is in Good Shape

Market factors play a huge role in the process of selling a business and much like selling a home, getting your business ready for sale requires planning and preparation. Just as you might keep your home freshly painted and your lawn neatly trimmed in the run up to a sale, you will also want to make your business looks equally attractive to a potential buyer.

Remember the old adage 'what you put in is what you get out'.

Even in a down economy, keeping your business in ship shape condition with sustained sales and marketing efforts can help you position it for a quick and strong sale when things start to pick up.

The dichotomy is that when things do start to pick up, many entrepreneurs are hesitant to back away from their business as they enjoy a boom time, the consequence being that they often reject potential buyers, only to regret their decision when their business takes a downward turn.

In this 'Planning your Exit' guide the Small Business Administration (SBA) offers small business owners tips and advice to maximize the value of their business while developing a 'getting out' plan. It also includes a checklist of items (including obligations to your employees, partners, property managers, and so on) that should be considered as early in the process as possible.

Before the For Sale Sign Goes Up - Understand your Tax Situation

Aside from market conditions and the health of your business, another area to consider before selling up is the tax ramifications of doing so.

As sure as eggs are eggs, the IRS will take a large share of the money you receive from a business sale. A CPA or tax expert can help you understand what to expect in this regard but, as a rule, the structure of your business will influence this number. For example most corporations, LLCs, partnerships, and sole proprietors are asset sales - and the IRS typically treats each of these assets separately for determining gain or loss.

Read more at IRS.gov Sale of a Business Guide. You can also learn more about how your chosen business structure affects your tax obligations from Business.gov here.

Setting a Realistic Asking Price for Your Business

This might be the first aspect of a potential business sale that keeps your mind occupied, but deciding upon a realistic asking price requires research, market insight, and oftentimes expert intervention. Trying to determine the worth of your business is not easy and, while sale prices typically depend on profit values, it is often best left to the experts to determine a fair market price. An appraiser or a business broker can help. The latter can even help guide you through a confidential sale and screen prospective buyers.

The SBA offers a variety of guides to help you make sure the price is right, help you find a buyer, help get seller financing, and much more. Read them here.

Understand how to Close Your Business Legally - State and Local Regulatory Obligations

In addition to taking care of your federal tax commitments (refer to this Closing a Business Checklist from the IRS) you will also need to check off several state and local government regulatory requirements associated with selling a business. These include but are not limited to:

  • Releasing fictitious 'doing business as' names
  • Filing forms with your state for the dissolution or cancellation of a partnership, LLC, or corporation
  • The cancellation of any permits or licenses you hold with your county or state
  • Processing your final employee tax forms such as payroll taxes, withholding reports, etc.
  • Notifying your local Commissioner of Revenue about your changed business status

Read *'What Steps Must I Follow to Close My Business Legally?' (*www.legalmatch.com) to learn about the five steps you need to take to legally close your business and check your individual state requirements here.

Get Help from these Resources

Every business is different so it's best to get independent advice about the particulars that apply to your business sale. The government offers many free in-person resources across the country who can help with all stages of running, and selling, a small business. These include SCORE, your local SBA office, Small Business Development Centers and more. Business.gov lists all the available free and confidential local small business assistance resources here.

* Note: Directs reader to a non-government Web site.

About the Author:

Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

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