Reasons to Sell Your Business as Part of Your Estate Plan
For many business owners and entrepreneurs, passing a successful company on to their children is one of the primary motivations for building the business. However, for a variety of reasons, this does not always work out. If any of the following statements describe you, you may need to sell your business as part of your estate plan:
1. Your children, grandchildren or other
heirs and beneficiaries do not have an interest in running your business. Even if you have heirs interested in taking over your business, they may lack the skills, experience or discipline to successfully manage a company.
2. The amount of money your family will need to live after your death exceeds the amount of income they would receive from owning the business. If this factor is one reason you may need to sell your business, consider whether you can buy
life insurance to provide more financial security for your dependents.3. You do not have any living relatives or other legal heirs.4. Your business or its assets will have to be sold to pay creditor claims and other financial obligations of your estate.
5. Your vision for your business requires it be operated by a leader in the industry or a third party you have identified rather than anyone in your family.6. You want to sell now while the valuations for your business are higher to avoid the risk of having your company stock or business assets sold at a later date when prices may be lower. See Stock Powers.
Do You Need a Business Broker to Sell Your Business?
There are several reasons you may benefit from using a business broker to sell your business. If you have been unable to identify a prospective buyer, a business broker can match your business with interested, qualified purchasers. A business broker may already be aware of prospective buyers interested in acquiring the type of business you own or certain assets owned by your business.A business broker can market your business while maintaining your confidentiality so employees, competitors, and vendors donít learn of the proposed sale until you are ready to disclose it. Listing the business for sale on your own may require you to reveal information you do not want made public. Also, your competitors and those interested in entering your market may view your business being listed for sale as a potential weakness they can exploit.If you are concerned about entering into negotiations over the valuation of your business, a business broker can represent you and serve as an intermediary, which may result in a higher sale price for your company. An experienced business broker should also be able to connect you with the right legal and financial advisors to help you structure the transaction, minimize tax liabilities such as estate taxes, handle employment matters, etc.Most business brokers are paid a commission based on a percentage of the business sale price. One of the best resources for finding a business broker is the
International Business Brokers Association, Inc.Exercise caution when listing your business for sale. It is generally a good idea to read reviews of the forum or marketplace where you will be listing it. Consult a business lawyer about any form contracts you may be asked to sign. Have any potential sales contract reviewed well in advance of negotiations so you know key points that could cause the deal to fall apart.Copyright 2020 Pennyborn.com. ALL RIGHTS RESERVED.Updated February 13, 2020.
INFORMATION ON THIS SITE, INCLUDING ARTICLES, ESTATE PLANNING FORMS, AND THE ESTATE PLANNING BLOG, DOES NOT CONSTITUTE LEGAL, FINANCIAL OR TAX ADVICE. Pennyborn.com is not a law firm and is not a substitute for a lawyer. Your use of this site does not create an attorney-client relationship. Information on this site is for educational purposes only and may not be accurate, complete or up to date.
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