Selling A Business To Family Members
There are nowhere near as many family businesses around as there used to be. They have given way to larger corporations and companies that seem to have very few ties to the modern family. The majority of those family companies and businesses that still do exist are small businesses and may not necessarily have been established as a family business to begin with. However, if the owner wishes to sell the business to free up time or as a result of old age or a loss of interest, and a family member expresses an interest in buying should that owner sell?
Selling a business to family members can either be a harmonious transition that is completed in the best interests of all parties or an absolute nightmare that is worse than selling to a stranger. Whether this falls into the harmonious or nightmarish categories for you depend on the person you are selling it to, and also whether selling is in your best interests. However, you first need to know how to decide whether or not selling is right for you.
The Right Move?
Before selling a business to family members, you need to think about whether it is the right move for you. The first step in this process is evaluating why you are selling to begin with. If you do genuinely want to reduce your role within the company or retire from it and move on, then selling to a family member could be a smart move. For the first reason, it may be easier to negotiate a regular position within the company than if it was sold to a stranger who may not want you around. Similarly, if it is for the second reason then the business remains in your family and so relatives will continue your legacy.
However, if you are leaving a business for any other reason than your own free will then family members may not be the best people to sell to. Although rare, it is not out of the realms of possibility that you may be under pressure to sell to family, and this can cause your judgement to cloud. Selling a business to family members is not always the right path to take, so it is important that you look at it from an objective point of view with a business perspective. Some members of your family may not possess the right skills to take the business on or he or she may not even want to. These are all factors to look into.
How To Make The Process Easier
If you do plan to sell a business to family members then the best way to deal with the sale is to do so as you would if you were selling to a stranger. Ensure that your lawyer draws up the legal documents. Have the business valued and then negotiate a fair price for it. Ensure that the terms of ownership are clear and that any reduced role you may play in the business is legally set in stone. You should also consult an accountant to find the most tax efficient way of selling, as you will undoubtedly have to write off a percentage of the sale for tax purposes.
The best possible way of making the process of selling a business to family members easier is constant communication. You should discuss any future plans your family members have as well as your expectations for the business in the short and long term future. Communicating and entering into discussions on a regular basis will enable you to make an informed decision. Ultimately, this decision should provide you with peace of mind that you have chosen the best buyer to take the business that you have worked so hard to build forward.
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