What’s the Best Way to Transfer a Business?
Whether your business is large or small, there may come a time when you are ready to transfer ownership to another party. If you’ve never transferred a business before, you may have some questions about how to do this. Fortunately, there are several options available.
If you run your own business, you understand just how important the owner of a company is. It’s up to you to decide how the company runs, how you’ll manage services or products, and how your employees are taken care of. There may come a time when you decide you’re ready to part ways with your company. Whether you want to transfer your business in the near future or you simply want to plan how your business will be transferred when you’re ready to retire, there are several options you should consider.
Transfer to a Co-Owner
First off, you can transfer your business to a co-owner. This is one of the most common ways to transfer a business. One of the primary benefits of transferring your business to a co-owner is that they are familiar with the way the company runs and knows exactly how to keep it going. When you transfer your company, you want to know that it’ll be in good hands. Choosing a co-owner as your business successor is one way you can accomplish this. You can choose to sell your portion of the company outright to the party you choose or you can choose to arrange a buy-sell agreement. In this type of situation, you can designate an event, such as disability or death, that can trigger the sale of the company to the other person.
Sell to an Employee
Another option is to transfer ownership of your business to an employee you trust. If you have someone working for you who is highly motivated and who understands the ins and outs of the company, you may want to talk with them about purchasing the company when you retire. Another alternative would be to transfer the company to them upon your death. When you are ready to step down as head of the company, you’ll want to know your organization is in good hands. Choosing an employee you care about is one way to make sure this happens. No one else understands the ins and outs of an organization quite as well as an employee. You can choose to sell your company to the employee through a buy-sell agreement or you may want to consider setting up a trust to simplify the process.
Consult With an Attorney
No matter how you choose to transfer your business, it’s important to have things done legally. For example, if you want to sell your company outright, you’ll need to make sure you’re selling it at market price. If you choose to lower the price, the recipient may need to pay gift taxes or additional fees that may end up negating the “discount” you offered. Similarly, if you want to set up a trust or buy-sell agreement, you’ll need to have this documented and arranged by an attorney who understands how business law works.
Make sure you reach out to an attorney who can assist you with setting up your business transfer. The sooner you get started, the sooner you’ll know that your company is in good hands.