Exiting your business can be a ‘taxing’ issue

Whenever I’m approached by a business owner wishing to exit their company, they all want the same thing – to achieve the most financially advantageous exit.

With tax having such a huge impact on the sale of a business, it is, first of all, important that the business owner understands the tax implications of selling their company and how much money they can expect to lose out to the taxman.

Obviously the aim is to minimise this amount, whilst maximising the amount that goes to the business owner – the one who has actually earned this money! Whilst remaining on the right side of the law, of course.

If you are planning to sell your company, you could be liable to pay capital gains tax on the profit that you make from the sale of your business; the rate that you are subject to will depend on how long you have owned the business for.

Currently, capital gains tax allowance stands at £10,100 for 2009-10, so any profit under this threshold is yours to keep. Anything above this threshold is liable for the taxman to take his share.

If your company is classed as a business asset (the operations of your particular company will determine this) then you could also be able to claim business asset taper relief – which will reduce your capital gains tax bill by anything up to 75%.

If, like 40% of all other entrepreneurs, you invest this profit in another enterprise and become a ‘serial entrepreneur’ you can avoid your capital gains tax bill entirely. The only downside to this is, the profit still isn’t yours to spend – it’s now tied up in another business just as it was in your original company.

It’s often a wise idea to employ the services of a tax advisor and business exit specialist to help you determine the most tax-efficient, economically advantageous option available to you in your particular situation. The cost of paying for such advice and guidance is almost always far-outweighed by the gains made from implementing whatever strategy they advise.

Take Mr Smith, from a successful manufacturing firm. He released the value in his business by selling the company to his three sons. During this process, his tax advisor and business exit specialist helped him to decide on the best people to sell the business to, structure and organise the firm ready for its takeover, arrange the valuation of the business, and undertake the entire sales process – ensuring all legal requirements were met.

Without this professional assistance, Mr Smith is certain that he would not have experienced such a favourable outcome when exiting his company.

Mr Smith was yet another of our many satisfied clients.

So if you’re planning on parting with your company anytime soon, give us a call on 01709 810081 to enable us to help you through the entire process and maximise the value of your business.