Selling your business and succession planning
If you own a successful business but are at the stage where you’d like to sell it, either to retire or to do something else, there are several options to consider. There are also lots of things to do beforehand, which we’ll discuss here too.
A holding company could be a good option
Doing this means you’ll be able to get access to company money, but you can move its assets (including shares), so they can be sold easily. And if you’re thinking about passing your business on to a family member, it’s also a good way to do it as ownership of shares etc. can be moved easily.
It’s tax efficient too
Selling or changing the ownership of a company this way has lots of advantages as there are tax savings to be had. For example, share disposals and dividends are tax exempt.
Sales of shares in a subsidiary company (companies the holding company owns at least 10% of shares in) are also tax exempt provided they’ve been held for at least 12-months consecutively. This is known as Substantial Shareholding Exemption.
A holding company will also be exempt from VAT if:
- Its main function is the buying of and selling shares in subsidiary companies
- It receives dividend payments from shareholdings in subsidiary companies
- It defends itself and its subsidiaries from takeovers
Obviously, you can only do this if you own a limited company. If you’re a sole-trader or partnership it might be worth considering structuring your company as a limited company and selling this way if you can.
What are my other options?
Of course, there are other ways to sell your business, which could suit your needs, especially if you don’t have the time to go through the holding company process.
Sale of assets
As the name suggests, this is where you sell the assets of a business. These include machinery, technology or intellectual property - basically anything that’s considered vital to running the business. Once sold, ownership is transferred to the buyer straightaway.
This type of sale is usually how sole-traderships and partnerships are sold. Limited company sales use a very similar process called a sale of shares.
Sale of a business
Also known as a ‘sale of a business as a going concern’, this is where the whole of a business is transferred to a new owner. They become liable for any business debts and obligations and will usually take on the established business name.
Things you should do beforehand
Whatever type of business you’re looking to sell and however you do it, we’d recommend making sure everything’s in order before you start the process. Here are some of the important things you should concentrate on (not all of these might apply to you).
- Prepare up-to-date accounts
- Tidy up any leases and contracts
- Settle any outstanding litigation or employee disputes
- Cut down personal cash withdrawals from the business
- Reduce owner dependence and increase management responsibilities
- Sort out the tax and ownership structure
Ready to chat?
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