Moore Thompson accountancy firm in Market Deeping advises how to exit your business
There comes a point in many business owners’ lives where they must consider the inevitable sale of their business, writes Matt Upex of Moore Thompson accountancy firm in Market Deeping.
For some, it may be a necessity to fund their next big venture, while for others it could be to achieve a lifelong dream of retiring comfortably.
Whatever the reason, exiting a business comes with a number of challenges, as well as the prospect of some fairly considerable tax bills.
How an exit is structured and the way in which the business is transferred can have a big impact on these factors.
Having worked with many business owners during the challenging sale process, we have a good idea of the unique issues that often arise during negotiations and afterwards.
One key consideration is capital gains tax. This tax is paid on the gains made from the disposal of shares in a company.
Thankfully, many business owners can rely on business asset disposal relief, which was formerly known as entrepreneurs’ relief.
This allows taxpayers to pay CGT at a lower rate of just 10 per cent, instead of the standard rate for most higher earners, which is 20 per cent.
The relief is subject to a £1 million lifetime limit on gains, which means a current maximum potential tax-saving during a business owner’s life of £100,000.
This is only one part of achieving a successful and cost-effective exit though. Much more goes into a successful sale, not least important financial due diligence on potential purchasers of a business.
Some businesses may even need to consider taking out finance to support the purchase of shares and other resources to achieve the requirements of a sale and ensure a clean and effective disposal.
Given the various factors that go into an effective exit, it is really important that business owners seek professional advice beforehand.
Putting a plan in place isn’t something that should be done haphazardly, and many owners begin putting in the steps for a sale, months or even years in advance, so as to maximise the price for their business while minimising the tax they pay.
If you need advice on selling a business, please speak to me or another member of our team by calling 01778 380850 or visiting www.moorethompson.co.uk