While starting your entrepreneurship journey, it's good to look at all possible outcomings, including a transfer of business. A business transfer is a change of ownership of all business properties from one entity to another, or an individual, at a fee. These properties include business assets, ongoing contracts and tenders, documentation, and employees. During transfers, the new owner is the buyer, while the original business owner is the seller.
Transferring a business isn't always an easy process. Most entrepreneurs have dedicated their lives to building their start-ups to the point they have a resale value. Therefore, business owners tend to attach to their enterprise, creating a hard time during business transfers. That said, a business transfer isn’t always a negative thing, and although difficult, it has its advantages too.
So, why would an entrepreneur consider selling their business, and how do they go about the process?
Steps For Transferring Business Ownership
Transferring a business is necessitated by several things. To start, if your business is part of your retirement scheme, you may have to put it under new leadership. This is because, with time and age, your efficiency reduces, and if not checked, it may jeopardize the performance of the business. Instead of having the rest of the team questioning your decisions, transferring your business to a partner while you still make profits is a better alternative.
You can also decide to sell your business entirely and use the money for retirement. Other than that, some people are in the business of building start-ups and selling them at a profit. Before making any decision about selling or buying a business, seek the services of a business valuation company.
If you're in Australia, several companies can help with property transfer, including conveyancing Brisbane specific. However, before hiring conveyancing services, here are some of the steps to follow for a successful business transfer.
Step 1: Plan Your Business Transfer Ahead
Transferring a business isn’t a decision made in a fortnight. Since a lot of money and properties are at stake, you have to be sure about the decision and the steps you’ll take to execute it. The first step of planning your business transfer is identifying what type of transfer you want. Types of business transfer include:
- Sale of business: The business is sold to a new company.
- Gifts and succession: This is where you transfer your business ownership to a beneficiary, mostly a family member.
- Reassigning ownership among multiple owners: This business transfer is where a partner in a Limited Liability Company or partnership relinquishes their voting rights, profits, and responsibilities to a new individual.
- A lease purchase: The buyer leases your business for some time during which it operates under their leadership. A lease purchase is made when the lessee is looking to test the company's performance before acquiring it fully.
Different business transfers have different tax implications. Similarly, although there are separate procedures to follow.
Step 2: Hire A Team Of Experts To Advice You
Transferring a business can sometimes be complicated and tedious, given the endless paperwork. Some of the information in the documentation, although very critical, may be hard to break down by yourself, necessitating a team of experts.
Consider hiring a lawyer to guide you through the legal requirement of selling your business. Throughout the transfer, they can also represent you to ensure the process remains professional and safeguards your best interest.
It's also recommended that you hire a financial advisor. They’ll help you determine the best approach for transferring your business and ensure you reap maximum profits from the process.
Step 3: Conduct A Business Valuation
Before selling your business or handing it over to your successor, you're advised to determine its value. Get a third party to conduct the valuation to avoid bias and favor. The valuer could be an investment banker or a professional business valuer.
Conducting a valuation will help you determine what value you're selling, and hence you can bargain for fair prices. In the case of business transfer by succession, a business valuation helps your successor grasp the company's size and prepare accordingly.
Step 4: Transfer Your Business
Once all the paperwork is ready and approved, it's time to transfer your business. This step entails transactions between the buyer and seller. Unlike popular belief, a company isn't sold in a single installment. Buying a business is very expensive, and hence the cost is usually spread over a period of time.
Before payment, you and the buyer should agree on the best mode of payment. While doing so, consider the state laws, tax implications, and the reliability of the payment method. One of the safest ways to transact a business transfer is through a credible bank.
Step 5: Inform Your Suppliers, Vendors, And Customers of The Transfer
Once the business transfer is successful, it's recommended that you notify your suppliers, vendors, and customers. Many changes happen after a business transfer, including the renewal and amendment of contracts.
As such, it's critical that you inform your suppliers so that they can prepare for the changes. If there are no changes, notify the suppliers of the new leadership to have a point of contact with the company.
Although informing your customers may seem unnecessary, it's ethical for you to tell them of the change of ownership and thank them for their cooperation for the period you transacted with them.
To Conclude
Transferring your business is already an emotional task. By following the five steps mentioned above, you can avoid further stress and ensure a smooth, successful business transfer. All the best in your new beginnings.
