Why You Should Consider Incorporation before Listing a Business for Sale
In the world of commerce, there is always an opportunity, and if you're in charge of a successful small business, then you may want to seek a new owner as a part of your plans. However, before you put the business up for sale, you may find it advantageous to change its structure so that a prospective owner can analyse the accounts more efficiently to make the transaction much easier. What do you need to think about before you restructure?
Incorporation
Over the years, you may have traded without a formal structure or have been in partnership with somebody else. This may have worked well for you so far, but the size of the business may now make it advantageous for you to consider incorporation.
More Transparency
When you incorporate, a lot of the formal details will be held by the company registrar. They will be publicly available, and this will make it easier for a prospective buyer to find out the crucial data before they proceed. You'll also be required to submit accounts in a specific format, and this may also make it easier for you to communicate with an interested party.
Accuracy of Detail
You will need to make sure that you are reporting everything accurately and that everyone can understand the transition between the partnership and the limited company. Once you have completed that bridge, then you will be able to adjust your accounting system and reporting process so that everything is in line with expected company practice.
Modified Contracts
Remember, you may have to review some of your existing contracts and agreements with vendors and modify these accordingly. After all, you must ensure that you have a predictable and confirmed flow of business with vendors as this will be a crucial part of the attraction for your potential buyer.
Shareholder Transition
Once you have set up a limited company, both you and your existing partner will now be shareholders. You will need to discuss how you are going to proceed when it is time to sell and what will change from a tax perspective. You should certainly talk with an accountant at every stage of this process so that you can maximise your situation as much as possible.
Important Detail
You must get all the detail right as you incorporate so that the business is ready to be sold at the appropriate time. Make sure that all your legal agreements are in place and that you meet all the government requirements by adding a commercial lawyer to your team of advisers.
To learn more, contact a commercial lawyer.
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