Everyone starts his business the dreams of earning millions. But there may be circumstances when you need to exit your business, mainly because of financial reasons. When it comes to selling your business, you will definitely want to keep your after tax dollars as much as possible; after all, you invested a lot of hard work and money into it. If you plan your business exit strategy properly, you can create a lot of difference in the dollars you can pocket after selling your business.
Before planning your business exit strategy, you need to understand whether it is a long term involvement or a short term involvement. If you are planning to exit from a long term involvement like a sole proprietorship, then you should increase your salary and pay bonuses to yourself few months before your exit. With larger income, larger tax liabilities will also come. Make sure to settle all your debts so that you can simply close your doors and liquidate your remaining assets.
If you are in a partnership like a medical or law practice, you should sell your shares and also your equity to your existing partners or new employees who are eligible for partnership. In this way, you will be able to leave your firm cleanly and also gain earnings from these sales.
In order to liquidate, you should sell all your assets at their market value and utilize the revenues for paying off the remaining debts. This is a straightforward approach but is likely to reap out the least revenues. As you are just matching your assets with the buyers, you will sound to be eager to sell and thus, may be at a disadvantage while negotiating.
Sometimes, two businesses may create increased value than a single company. If your firm has any such possibility, then merging may be the best thing you can do to exit your business. If you want to leave the entity entirely, then the company you are merging with will be needed to stay on in the market. If you are not planning to relinquish all your involvement, then you can choose to stay on the advisory panel.
Selling the company outright may also allow you an easy exit. If you want, you can take all the money and severe yourself from your company. You can also negotiate for the equity, allowing you to earn the dividends afterward. This is absolutely in your interest to make sure that your firm is appropriate for the buyer so that it can prosper.
As starting a business needs proper planning, exiting from it also needs a lot of consideration. By following these business exit strategies, you can gain benefits even while closing down the business.