Are you wondering what good practices and precautions to put in place for a successfull sale? Here are the 4 key steps to selling your business successfully.
Stage 1: Preliminary questions
You're considering selling your business, but you'll need to figure out the first steps. It's important to understand that selling your business will impact your tax and asset situation. Here are some essential steps to guide you:
1. Draw up a financial plan.
Consult a financial adviser who will guide you through the impact of the sale on your assets, tax situation and pension fund. A financial plan will enable you to draw up a roadmap to ensure your future financial security and identify potential opportunities and pitfalls.
2. Assess the opportunity to reorganise your company.
The tax implications of selling your business will depend on its legal form. A thorough tax analysis is necessary before selling your business. The results of this analysis suggest you consider changing the legal structure of your business or reorganising its assets before the transfer. There are deadlines to be met, so thinking ahead is essential.
3. Pay yourself a dividend.
Protect yourself from a partial liquidation by paying yourself a dividend. Dividends are tax-deductible and exempt from AHV contributions. Please make sure that your company's cash reserves are not used to distribute profits to the future buyer during the 5 years following the sale to avoid these amounts being taxable capital gain.
4. Cover the risks of disability and death.
As an employee of the company, you benefit from insurance in the event of disability due to illness or accident and protection for your family in the event of death. If the sale of the company does not end with your retirement, it is important to review your cover requirements. Extending your accident cover for up to 180 days is possible by taking out contractual insurance or incorporating certain risk cover into your vested benefits account.
Step 2: Preparing for your retirement.
Now that you've decided to sell your business, it's time to focus on your retirement and explore the steps you need to take to prepare yourself properly.
1. Fill any pension gaps.
First and foremost, filling the gaps in your occupational pension plan (2nd pillar) is important. To do this, we recommend carefully reviewing your latest BVG certificate to see if you need any adjustments. Remember that this may be your last chance to make a fully tax-deductible purchase. Bear in mind that this will impact not only your retirement benefits but also any inheritance, risk cover (disability and death) and the availability of your assets.
2. Find the right solution for your pension assets.
Your retirement savings often represent a significant part of your assets, and choosing the pension fund and investment strategy that best suits your situation is essential. When you retire, the choice between an annuity and a lump sum will also be decisive. So, please take the time to look through your options carefully.
Step 3: Putting your business up for sale.
After many years at the helm of your company, the time has come to sell it to a new owner. You must find that buyer but don't underestimate the challenges in this search and in presenting and making the documents you need available to sell your business.
1. Master communication
The search for a potential buyer involves revealing, to a certain extent, your intentions to transfer your company, which entails the risk that your employees and business partners will also be informed. Poor communication and uncontrolled rumours could harm the company's interests and your own. So please be careful in your dealings and make sure you communicate clearly and in a controlled manner.
2. Sign a non-disclosure contract.
A non-disclosure contract with a potential buyer is of crucial importance in protecting your company's interests. This contract will enable confidential information to be passed on to the potential buyer without the risk of being disclosed to a third party, used inappropriately, or exploited directly by the buyer. So, please make sure you put this protection in place right from the start of the sale process.
3. Facilitate the transaction.
To reassure the potential buyer and enable him to assess your company's overall situation, provide him with all the relevant legal, tax, accounting, and economic documents. Total transparency and good organisation will help to show how your company runs its day-to-day business while avoiding the discovery of elements that could lead to renegotiation of the transaction later.
Step 4: Finalise the sales contract.
Once you have defined the essential elements of the transaction and taken all the necessary precautions regarding their impact on your assets, pension fund, and standard of living, it's time to act and conclude the sale contract.
1. Limit the contract's coverage.
It is not uncommon for disputes to arise between the buyer and the seller after the sale has been completed. In most cases, the purchaser will seek compensation for any damage arising from the breach or inaccuracy of a warranty mentioned in the contract of sale or from the non-performance of an obligation undertaken by the seller in that contract. It’s therefore essential to limit the seller's liability as much as possible by including protective clauses in the contract of sale (such as a de minimis clause, a maximum amount of liability or a limitation period beyond which the purchaser can no longer take legal action against the seller, etc.).
Selling a business is no easy task. Establishing a solid financial structure, retirement plan, and the legal conditions necessary for a smooth handover can sometimes be challenging. That's why it's advisable to surround yourself with experienced professionals who thoroughly grasp the issues involved in such a transaction and have a vast network of contacts.
Our Wealth Advisors will happily answer any questions and help you with your sale. Make an appointment now!