How to Sell Your Business

Sale of Assets and Sale of Shares

If selling your small business is your succession plan, you will need to determine the best option for selling this important transaction. Whether you plan to sell your business to a partner, an internal management team, or a third-party buyer, there are two types of business sales to choose from: sale of assets and sale of shares.

Sale of Assets

In an asset sale, you sell the various assets owned by the business. The assets can be:

• Tangible: land, buildings, equipment, cash, investments, inventory
• Intangible: goodwill built by your business over the years, customer lists, patents, copyrights, trademarks

If your business is not established, for example, as a sole proprietorship or partnership, then an asset sale is the only option for selling, as there are no share certificates of ownership to transfer in the sale process. To determine the sale price of the business, the various assets of the business are appraised individually.

For example, the following table illustrates how business assets can be priced and identified in an asset sale:

Asset Value	Equipment	Inventory	Accounts Receivable	Delivery Truck	Brand	Goodwill	Total
$10,000	$2,000	$4,000	$12,000	$10,000	$20,000	$58,000

This example shows that cataloging your business assets and their values to arrive at a sale price for your business is not as straightforward as it may seem. For instance, if you determine that your business’s goodwill is worth $20,000, you will need to justify that value to a potential buyer, who may prefer to leverage that value against a tangible asset to negotiate a lower price. To avoid these complexities, it is important to seek professional assistance to help you evaluate and sell your business.

Sale of Assets of a Sole Proprietorship

From an asset perspective, business sales of a sole proprietorship can be particularly challenging:

• Since there is no distinction between personal and business assets in a sole proprietorship, issues may arise when transferring tangible assets. For example, if the business is run from a home or a building owned by the owner, relinquishing the asset in the sale process poses a problem. Similarly, the owner may wish to retain other assets such as vehicles or equipment for personal use.
• By definition, a sole proprietorship is usually a business owned by one person, and thus the skills and experience of the owner often comprise most of the business’s value. In such cases, selling assets can almost become a sale of intangible assets that are difficult to quantify. For example, a financial consultant looking to sell their practice may place a high value on having a large client list, but clients may not regard the new owner’s skills and experience as equally valuable and decide to take their business elsewhere.

Sale of Shares

The other type of business sale, share sale – also known as stock sale – simplifies matters because you are selling the business’s shares instead of its assets. This can be advantageous as all business liabilities are included in the sale; therefore, as the seller, you are completely relieved from the business obligations.

However, the obvious hurdle to selling shares is that your business must be established as a corporation to be sold in this manner. So if you currently have a sole proprietorship or partnership that you wish to sell, you may want to restructure the business as a corporation first.

Sale of Assets vs. Sale of Shares

When comparing the sale of assets to the sale of shares, it is important to consider the advantages and disadvantages of each option:

• An asset sale can be used to sell any type of business; a share sale can only be used for the sale of a corporation. In an asset sale, you can choose what you want to sell to some extent. For example, you might want to retain the business name or a specific asset. In a share sale, the entire business transfers to the new owners, including items like the business name. In a share sale, the business liabilities are sold along with the rest of the business; in an asset sale, only the assets are sold, meaning the original owner may still be responsible for business liabilities. From a tax perspective, in a share sale, there is a possibility that the full amount you pay for the business may be tax-free if you can use your lifetime capital gains exemption to write it off. In an asset sale, that does not happen because the business assets will be affected by capital consumption rules.

Both

The types of business sales will have tax implications. You should seek advice from a professional accountant or lawyer to determine the best type of business sale for your situation.

Source: https://www.thebalancemoney.com/how-to-sell-a-business-asset-sale-vs-share-sale-2948477

“`css
}@media screen and (max-width: 480px) {
.lwrp.link-whisper-related-posts{

}
.lwrp .lwrp-title{

}
.lwrp .lwrp-description{

}
.lwrp .lwrp-list-multi-container{
flex-direction: column;
}
.lwrp .lwrp-list-multi-container ul.lwrp-list{
margin-top: 0px;
margin-bottom: 0px;
padding-top: 0px;
padding-bottom: 0px;
}
.lwrp .lwrp-list-double,
.lwrp .lwrp-list-triple{
width: 100%;
}
.lwrp .lwrp-list-row-container{
justify-content: initial;
flex-direction: column;
}
.lwrp .lwrp-list-row-container .lwrp-list-item{
width: 100%;
}
.lwrp .lwrp-list-item:not(.lwrp-no-posts-message-item){
“`

}
.lwrp .lwrp-list-item .lwrp-list-link .lwrp-list-link-title-text,
.lwrp .lwrp-list-item .lwrp-list-no-posts-message{

};
}