Here is part 3 of our 10 do's and don'ts of business selling. We gained these insights from hard-won experience and observing what can happen in the business selling market!
3. DON’T – Go into a sale process without getting advice on the taxation and other corporate and entity impacts of selling
Do – Understand the tax implications
Occasionally I find myself working with a business owner on a sale process and we are reviewing offers for the business from interested parties based on an asking price and an information memorandum that has been distributed on the business.
Then, right at the 11th hour, the business owner queries how that dollar value will impact them in terms of the tax they will have to pay and therefore the net proceeds they may receive from the sale.
Taxation implications depend on an array of issues, including how an individual business owner has their business and personal finances structured, including other income sources they may have.
Don’t wait until you’re getting offers on your business to understand the potential tax benefits and tax minimisation opportunities that may be available in the course of selling your business.
However, be careful not to let the tax ‘tail’ wag the business value ‘dog’. In other words, the market for businesses doesn’t assume a particular tax outcome when it’s valuing businesses.
But, if you’re armed with solid advice from your accountant or advisor on taxation impacts and different options, you’ll be better placed to consider the relative tax-based merits of offers that might come from the market.
If you would like advice or support to sell your business, contact the experienced team at JPAbusiness for a confidential, obligation-free discussion.
From the JPAbusiness archives, refreshed and checked for accuracy November 2016.
James Price has over 30 years' experience in providing strategic, commercial and financial advice to Australian and international business clients. James' blogs provide business advice for aspiring and current small to mid-sized business owners, operators and managers.