Sell Assets or Sell Shares: Two Options
When selling your business, many options and decisions are required to make the best deal possible and maximize returns while reducing tax burdens, liabilities, and other pitfalls that may impact a successful business valuation, listing, negotiations, and sale.
Assets Versus Shares
Whether to sell business assets or sell shares of a corporation depends on several factors and considerations. Here are a few key points to help you make an informed decision:
- Business Structure: If your business is structured as a corporation, you can sell shares of the company rather than individual assets. Selling shares means transferring ownership of the entire business, including its assets, liabilities, and ongoing operations. On the other hand, if your business is structured as a sole proprietorship or partnership, you typically sell individual assets rather than shares.
- Buyer’s Perspective: Consider the perspective of potential buyers. Some buyers may prefer to purchase specific assets or divisions of a company rather than acquire the entire business. This is particularly common if certain assets or segments are more valuable or align better with their strategic goals. Other buyers may be interested in acquiring the entire company to gain control, market share, or access to a particular customer base.
- Legal and Financial Considerations: Selling shares involves a transfer of ownership, which can have legal and financial implications. It may require more extensive due diligence, legal documentation, and the involvement of lawyers and accountants to ensure a smooth transition. On the other hand, selling assets may be relatively more uncomplicated and more straightforward from a legal and financial perspective.
- Tax Implications: Selling shares and selling assets have different tax consequences. Selling shares of a corporation may be subject to capital gains tax, while selling assets may involve various tax considerations, such as depreciation recapture or the allocation of the purchase price among different asset types. Consult with a tax professional or accountant to understand the tax implications specific to your situation.
- Future Involvement: Consider your own future involvement in the business. Selling shares may be suitable if you want to exit the business without ongoing responsibilities. However, if you wish to retain ownership in the company or have ongoing involvement in its operations, selling assets while maintaining ownership may be more appropriate.
The Decision Is Yours
Ultimately, the decision between selling business assets or selling shares of a corporation depends on your specific circumstances, goals, and market dynamics. It is recommended to consult with a team of professionals, including your business broker, attorneys, accountants, and business advisors, who can provide personalized guidance based on your unique situation.
Eric Wayne of Eric Sell My Business, an accomplished, award-winning, experienced, and trusted Florida-based and licensed business broker, has successfully helped business owners like you navigate and negotiate these turbulent waters and complex considerations for over 34 years. Eric knows what is best for your unique situation, risk tolerance, and best interests. He works for you, the seller.
