Business owners have more options than they realize when it comes time to sell or “cash out.” Taking the wrong approach could have serious financial consequences for both the entrepreneur and the company, which is whyit pays to know the pros and cons of the several ways to cash out and to think carefully about which is the right fit for your business and for you.
An outright sale is probably the simplest way to exit a business. This approach makes sense when an owner’s family members have no interest in taking it over, or when the owner can’t figure out how to take the company to the next level or meet challenges that may have arisen.
There are two ways to cash out: an owner can sell the company’s assets outright, or he can sell his stock in the company (or units, if it is a limited-liability company). Stock sales tend to benefit the seller, while asset sales are more beneficial to the buyer.
Asset buyers are getting the company’s physical equipment, facilities and customers, as well as intangibles such as trademarks and goodwill, and as a result they are generally protected against prior claims against the business. For example, the previous owners may be responsible if an environmental claim were made against their former property or if an employee hired on their watch was party in a lawsuit against the business, but an asset sale could protect buyers against these possible scenarios.
Want to see which option works best for you? Contact Moshe Hazout at Transworld Business Advisors today!