Whether you built a business from the ground up or acquired it another way, there comes a time when every business owner has to move on.
When you want the business to continue without you, that often means selling it. So you need to find a buyer who will do right by your business and ensure completion of the sale.
Navigating a business sale alone can be nearly impossible. With the help of the Weiner Law Group’s experienced New Jersey business lawyers, you can confidently sell your business.
To get started, please contact us today.
Preparing to Sell
Like many things in life, much of your success in selling a business depends on the preparation you put into it.
Identify Why You Are Selling
Be honest about why you are selling, even if the reasons are not ideal. For example, you may sell because you:
- Are retiring;
- No longer have time to run the business;
- Struggling with partners or co-owners; or
- Desire to pursue other opportunities.
You may want to sell because the business is not performing as well as you hoped or expected. In that case, honesty at the preparation stage can translate into an effective sales strategy.
Identify What You Are Selling
Your business may include multiple distinct assets and intellectual property. If there are some aspects of your business that you want to keep, identify them early on.
Hire a Team
Having a team to help you provides invaluable assistance. Along with an experienced attorney, consider hiring a business broker and an accountant.
Get Your Documents in Order
As you prepare, locate your:
- Financial documents,
- Business foundational documents,
- Business records, and
- Relevant contracts.
Finding every document you need can be time-consuming, but they often prove vital. Early on, however, prioritize essential documents that help determine your business’s value.
Have Your Business Appraised
You may be able to determine a reasonable sales price for your business, but it often helps to hire an appraiser. Should the results not align with your expectations, get a second or third opinion.
Create a Marketing Strategy
It is essential to guide your team on what is most important to you in the sale. The following questions can help you pin down your strategy for selecting a buyer:
- Who would purchase your business in your ideal world?
- Who would you be unwilling to sell to?
- Who is likely to be interested in your business?
- What time of year do you want to sell?
- Would you consider offers from individuals or entities without personally meeting them or their representatives?
- Would you consider offers from foreign individuals or entities?
- How important is the ability to pay upfront?
A few others can help you put your best marketing foot forward:
- What makes your business unique?
- What is the best thing about your business?
- What is the worst thing about your business?
- Why did you start the business?
- What are some of the challenges you have faced running the business?
- What do you think would appeal most to a buyer about your business?
How your answers come into play will vary, but these questions should get you off to a good start.
Create a Negotiation Strategy
When someone notifies you they are interested in purchasing your business, it can be easy to get ahead of yourself.
Even if you are eager to move forward, it is vital to understand how to negotiate when selling a business before you jump in. Often, that means setting your basic strategy in advance.
Regardless of the negotiator, you and your team must be on the same page. When designing your negotiation strategy, consider the following:
- Your ideal and minimum sale prices,
- What you are and are not willing to negotiate, and
- The tone you want to set during negotiation.
You can work with your team to strategize, so it is critical to think through what matters most when you do.
Selling Your Business
How the sales stage looks depends on whether you already have interested buyers or need to locate them, and whether or not you hire a broker.
You may need to adapt your marketing strategy while your business is on the market, including adapting to changing economic conditions and as you learn more about what potential buyers are looking for.
Once you have one or more offers, you begin negotiations. It often helps to let your team do most of the heavy lifting. Again, you may need to adapt your strategy to the circumstances.
If you reach an agreement with the buyer, put it into writing. After both parties sign, you work out the financial details and complete the paperwork required to make the transfer of ownership official.
After the Sale
Because businesses qualify as capital, they are subject to capital gains taxes at the state and federal level. Taxes on selling a business vary based on the price, the gain or loss, and your tax basis in the property.
Simply, your basis represents your business costs modified by increases or decreases like depreciation.
New Jersey taxes capital gains as income, with rates reaching up to 10.75%.The exact rate depends on income brackets, as New Jersey follows a progressive tax system. Short-term and long-term capital gains are subject to the same state income tax rates.
Federally, capital gains are taxed at 0% if your income is:
- $44,625 or below for solo filers;
- $89,250 for married filing jointly; and
- $59,750 for heads of household.
Gains are taxed at 15% if:
- $44,625 to $492,300 for single filers;
- $44,625 to $276,900 for married filing separately;
- $89,250 to $553,850 for married filing jointly; and
- $59,750 to $523,050 for head of household.
If your income exceeds these values, your capital gains are taxed at 20%.
The Sale Process
Along with working closely with your team, you can consult the following selling a business checklist to stay on track.
Selling a Business Checklist
- Identify why you are selling,
- Identify what you are selling,
- Hire your sales team (lawyer, broker, accountant,)
- Gather business documents,
- Gather financial documents,
- Determine a sale price,
- Create a marketing strategy,
- Create a negotiation strategy,
- Receive offers,
- Negotiate sale terms,
- Draft a final sale agreement,
- Sign your final agreement,
- Complete any necessary post-sale paperwork, and
- Pay your final taxes.
Get Started With the New Jersey Business Lawyers at Weiner Law Group
Selling your business can be emotional, stressful, and complex. Having the support of dedicated professionals, like the experienced attorneys at the Weiner Law Group, can ease the stress and help you move on to new horizons.