Navigating the financial implications of exiting your business can seem complex and overwhelming. Whether you’re considering selling your business, transferring it to others, or closing for good, each triggers a series of financial events you’ll need to resolve. This article delves into the financial aspects of exiting a business to help guide you through the process and pave the way for a successful exit.
Selling Your Business
When selling, enlist the help of an accountant, broker, or business valuator to ensure your business is priced properly. Professionals can help you get the best price for your business. You can also use market research to understand and prove your company’s value when you put it up for sale.
If incorporated, you can sell all or part of your business through a share transfer or by going public. You can raise capital by issuing an Initial Public Offering (IPO), where shares are sold to the public, and your corporation changes its status from a private to a public company. If you’re interested in this option, it’s highly recommended that you seek legal advice. If you’re in search of a lawyer, reach out to our Talk to a Lawyer advisory service.
Succession Planning
If you transfer your business to family members, friends, or other parties, the financial implications depend on your business structure and the method you choose to transfer ownership.
The common ways to transfer ownership of a company to family members include:
- Through joint ownership, either using a share transfer (if the business is incorporated) or using a partnership (if the business is an unlimited company)
- Through a sale, wherein your heirs would purchase the business outright or over a period of time
- Through your will or living trust
- Through gifting, wherein you would give parts of your business to your heirs gradually over several years
Due to the complexities of succession, we recommend that you draft a formal plan for a smooth transition and retain the services of a lawyer and accountant to help you sort through the legal and tax implications.
For more information, take a look at our article, The 9 Key Players of Succession Planning.
Closing Your Business
You might need to shut down your business permanently due to extenuating circumstances, such as a personal or family crisis, health issues, faltering revenues, or bankruptcy. In this case, the dissolution of your business might result in financial hardship.
When bankruptcy is your only option, it may be difficult, but it can also provide relief. While facing bankruptcy is difficult, it can also alleviate financial hardship. In this situation, your obligations may decrease as unsecured creditors cannot garnish your wages or take any other collection action against you.
However, you will be required to pay:
- Any outstanding taxes and payroll remittances to the Canada Revenue Agency
- Any wages or salaries owed to your employees
- Any secured debt, as secured creditors can repossess any property or collateral you had secured against a loan, such as your car or house
For additional resources, visit the Province of BC‘s page discussing the legal and financial requirements for exiting your business.
Small Business BC is Here to Help
SBBC is a non-profit resource centre for BC-based small businesses. Whatever your idea of success is, we’re here to provide holistic support and resources at every step of the journey. Check out our range of business webinars, on-demand E-Learning Education, our Talk to an Expert Advisories, or browse our business articles.