The decision to sell your business is a financial and emotional one. You are planning your retirement but you find it difficult to step away from your business. At the earlier stages, you should consult your tax accountant and consider other points such as tax opportunities, accounting and financial implications.
There are many ways to valuate a company – your small business accountant can discuss with you the available options. For large businesses, a Chartered Business Valuator may be required. For other businesses, the accountant or a business broker can provide a valuation for your business. No matter what the valuation opinion is, in the end your business is worth what the potential buyer is willing to pay for it.
You should ask your accountant early enough in the process what are the tax and accounting opportunities available to you. One of the best planning tools is to use the Lifetime Capital Gains Exemption on sale of shares of your small business. Because there are term limits regarding the ownership of the company’s shares, your tax accountant can advise you well in advance about any tax pitfalls.
Any potential buyer will want to review the tax and accounting records of your business. You need to work with your accountant and make sure that all tax and accounting information is readily available (usually the last three to five fiscal years). Your small business accountant should be prepared to answer questions regarding your tax liabilities, tax refunds, accounting and financial information, etc.
Sometimes the buyer will require audited statements for your business. Discuss this requirement with your accountant well in advance as such engagements are very time consuming.
In general the seller likes to sell shares, as he/she can make use of the Lifetime Capital Gains Exemption and transfer all business liabilities to the buyer.
Assets sale offers more flexibility to the buyer, but usually will put the seller in a higher tax rate.
Sometimes a hybrid structure may be put in place to accommodate both buyer and seller. Your tax accountant can advise you in advance about any tax and accounting options available to you.
It is essential to start planning the sale of your business well in advance. There are many tax, accounting and financial issues to consider. Discuss this with your small business accountant. It is important to weigh all options available to you before you negotiate the sale of your business.
Your trusted Chartered Accountant provides tax, audit and accounting services to small business, contractors, doctors and dentists located in Calgary and area.