Yorkshire and North East Dealmakers Guide 2016 - 24

24 SELLING YOUR BUSINESS individual might not be very large, if there are systemic problems across the workforce (in relation to holiday pay/allowances/travel time and so on) the amounts can be significant. It can also trigger reputational damage and fines." SELLING YOUR BUSINESS TAX CONSIDERATIONS All business owners that are selling want to minimise the amount of tax they will be liable for after the sale has been completed. The amount of tax owed to HM Revenue & Customs may well be the determining factor as to whether sale is a success or not. One important issue is whether the owner is selling shares in the business or selling the assets. It is more tax efficient for a seller if they are selling the shares. If they are selling the assets they will be liable for income tax or corporation tax, when the proceeds are taken out of a company (either as property or cash), on the transfer. There are two options for getting profit out of the company: the seller can either take it as a wage (paying PAYE on this) or draw a dividend (and pay corporation tax and income tax). When selling the assets of a business, the owner will need to consider their income tax and corporation tax liabilities. But there are other legal alternatives that will be put forward by their financial adviser. Whatever tax changes are proposed it is important to ensure they are in place 12 months prior to the sale. A failure to put things in place early enough will affect the outcome considerably. PROFESSIONAL ADVISERS Owners are usually immersed in the day-to-day running of the business and will have little time to dedicate to thinking about and preparing for a sale. Engaging a trustworthy professional adviser will allow much of this early thinking and preparation to be done. Good lead advisers, typically a corporate finance expert, with good people and dealmaking skills, are worth their weight in gold. Not only will they coordinate all the complicated sales negotiations and plot a path through the sticky legal and financial issues, they also take the pressure away from the business owner, even if the owner still insists on taking control of the sale process. The word that all pundits use in selecting a team to sell a business is 'trust': these experts will be given access to the company's most private information and secrets, perhaps including some the business owner would rather were kept from public knowledge, while being given the task of getting the best outcome. Failure to prepare properly, a failure to have all the tools available to negotiate from a position of strength and a failure to engage quality advisers with strong track records, will lead to accruing lower sale proceeds. THE CHECKLIST 1. Is this the right time to sell? 2. Are market conditions and the performance of the business strong enough? 3. Have you prepared for the sale early enough? 4. Is your business plan and sales memorandum robust and credible with realistic targets? 5. Do you know the market and where the buyers are? 6. Do you have long-term contracts that will give potential buyers confidence and certainty? 7. Is your management team strong enough? 8. Are your processes efficient and streamlined? 9. Have you taken good professional advice and acted on it? 10. Before you sign on the dotted line, has full due diligence been carried out?

Table of Contents for the Digital Edition of Yorkshire and North East Dealmakers Guide 2016