How to Transfer Business Ownership: What You Need to Know
There might be several reasons why you no longer want control of your business and want to transfer its ownership.
- • You might be doing it for the money for your retirement. Maybe you'd like to buy a new house or pay off a mortgage
- • You might be bored of your current business and have another idea that you would like to test waters in
- • With time businesses need to evolve to cope with the current market trends. You might not have the finances or means to update your business and make the relevant changes
- • Selling a business is fast cash. You might need the money to explore a new hobby or interest, travel the world, start a new venture or pay off medical expenses due to illness.
Whatever your reasons might be, make sure to watch out for the following things to gain the most profit from selling your business:
- • Make sure the buyers are quality people as you are selling something dear to you, and it matters that it should go into the right hands
- • Check the timing. There is always a good time to sell to make the most profit; check when that time is and then sell.
- • Start preparing a year or two before your intended selling date. This way, you can make the business look attractive to buyers and get a better price.
Selling the Business
If the business is privately owned, then a valuation needs to be carried out to find out the worth. This way, the owner and the seller can agree on a price depending on whether the entire company is sold or only a portion of it. There are two ways to go about selling the business:
Owner Financing Sale
In this method, the buyer pays an agreed amount in installments to the owner, which is documented in the transfer of ownership form.
Cash Financing Sale
In this method, the buyer pays the total amount to the owner by either drawing out a loan or using capital savings after agreeing on the valuation of assets.
Adding Partners or Reapportioning the Ownership between Partners
This is another method of transferring business ownership in which more partners can buy into their own interests. This method introduces new shareholders into the company transferring the majority of the share capital out of the owners' hands
Lease the Business
By leasing out the business, the lessee gets ownership of the company for a specified period. They can test out the business to see whether they can run it efficiently. If it works out, they can then buy it from the owner after the lease period ends or renew the lease.
Transfer the Business Ownership via Gifts or Bequests
A widespread way to give up the ownership of your company is by handing over the company to your children or another relative. It may be given as a whole or partial sale depending on how the owner wants it, or it may be given as a gift.
Upon their death, it may also be transferred to the beneficiary via the owner's will.
Finally, transferring your business is a huge milestone in life. Make sure to think it through. It is best to consult expert professionals to gain their perspectives. Business Rocket can help you with just that
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