5 Things Business Owner Should Know About Selling Their Business

Sun Mergers & AcquisitionsWhen you go to sell your business, there are several important factors to consider. The process isn’t always straightforward, which is why it pays to partner with a seasoned mergers and acquisition company like Sun M&A. Sun Mergers & Acquisitions is located in Hasbrouck Heights, NJ, and represents middle market business owners throughout the U.S.

Here’s what business owners should know about selling their business.

The Value of Your Business (And Why It May Not Match What You Think)

As a business owner, you may have a certain number you’d like to receive when you sell your company. However, your business valuation depends on several aspects, including the following:

  • Economic climate
  • Current demand
  • Competition
  • Physical and intangible assets
  • Profit margins

Other factors to consider include your customer base, intellectual property, unique selling proposition, and any existing agreements within your business. Each of these elements can affect your business’ valuation. Working with a business broker will help you determine your business’ value and prepare you for the process.

What Documentation You’ll Need

Selling a business within any industry requires meticulous documentation and records. Haphazard paperwork can make potential buyers second guess their interest because they perceive a risk. They may question your business’ legal standing, operations, and finances. Preparing in advance will help present your business in the best possible light when you go to sell. The following materials should be in order in advance.

  • Tax returns
  • Profit and loss statements
  • Bank statements
  • Accounting records
  • Future growth projections
  • Permits and other legal documents
  • Contracts between any other party

Another consideration is to have documentation outlining your business process, such as an organizational chart, a list of each employee’s responsibilities, and operational guidelines.

The Tax Implications of Selling Your Business

A complicated, yet necessary thing to know when you sell your business is any tax implications. Your business sale will come with obligations. Per New Jersey tax law, business sales are subject to capital gains for both the state and federal level. However, that’s the beginning of your tax navigation, as the structure of your business can affect tax incomes. For instance, a corporation is different from a partnership, so be aware of how these business structures can vary. Working with a qualified tax accountant can help you anticipate your tax obligation and possibly minimize your liabilities.

Legal

As with any major business move, selling a business necessitates legal and regulatory requirements. These requirements are designed to protect both the buyer and seller. Depending on your business and its operational process, you may have to consider things such as:

  • Local, state, and federal permits
  • Employee and HR compliance
  • Health and safety regulations
  • Environmental regulations
  • Intellectual property rights
  • Stakeholder and partner agreements

Working with a qualified attorney will be necessary when it gets to due diligence and contract negotiations.

What You’ll Do Next

Another area business owners should consider is what they will do next. How will you invest your proceeds from the sale and do you plan to take an advisory role for the next owner? Consider staying on the company’s board? It’s important to consider these questions in advance of a sale. Remember that your business was likely a huge part of your life, and when you make this transition, you may have a big gap to fill. While this isn’t a consideration for the legal or financial aspects of your business, it’s still a key consideration.

Our team at Hasbrouck Heights, NJ-based Sun M&A has extensive market knowledge and a strategic approach to connect sellers with the right buyers. Reach out to us if you would like to explore the sale of your company.