To sell business, you usually have two options: asset sale or share sale. The choice is mostly dependent on the size of your business and the nature of your business. With that being said, it is wise to understand all three options before you go ahead and contact the business valuation expert or put your business on the market.
Just as the name implies, with the asset sale, you will mainly be selling the different assets of your business. The assets may be tangible or intangible. The tangible assets include equipment and inventory whereas the intangible ones include the goodwill that your company has built over the years or the trademark. To sell business, you must first make a list of all your assets. This is what will give you the actual value of your firm.
The business valuation expert will account for all your business assets when determining the actual value. Every individual asset has to be appraised. Hiring a good business valuation expert is very important. The last thing you would want is for your business to be valued wrongly. This means you will either sell at a loss or push prospective buyers away. Before you sell business, you need to spend a significant amount of time choosing the valuation expert. In valuing the business, the valuator has to make a list of all your assets and their actual value.
The hardest part in an asset sale is the part on valuing the intangible assets. For example, how do you know the worth of your goodwill? You have to prove that the goodwill is worth the amount stated. This is why you should consider professional help before you sell business.
The second type of business sale is the share sale. This is also known as the stock sale. This type of sale is not as difficult because you are actually selling the shares of your business. The best thing about considering this option as you sell business is that all your liabilities will be included in the sale. Consequently, at the end of the transaction, you will be completely free of the business.
In addition to that, a share sale is quite beneficial tax-wise. You can make use of the many exemptions to cover the sale. Talk to a business broker San Diego for guidance on a share sale.
All in all, there is downside to the share sale. For it to be possible, your business has to be incorporated. This means if you only have sole proprietorship it will not be possible to initiate a share sale. You will have to restructure before you sell business.
What is the difference between the two?
The key difference between the asset and the share sale is that the asset sale can be used to sell any business whereas the share sale is only possible with the incorporated businesses. Additionally, the asset sale gives you options on what you want to sell and keep. The share sale requires the sale of everything. There are pros and cons to both options. Talk to a professional before you choose the option you want to use to sell business.