Selling a business should allow shareholders to walk away with the maximum value for the time, effort and capital invested over the years. Yet according to a recent survey by Capital on Tap, 79% of business owners do not have an exit strategy in place and 36% have no plans to create one. <\/p>\n\n\n\n
Without proper planning, common legal pitfalls such as rushing the sale, misunderstanding your business structure or failing to release security interests can quickly complicate a transaction. <\/p>\n\n\n\n
While it is important to address legal considerations early, the accounting and tax implications of a sale can be just as consequential and are often overlooked until it is too late. <\/p>\n\n\n\n
In this guide, we break down the key tax and accounting pitfalls to watch out for and how to address them before going to market. <\/p>\n\n\n\n
When preparing for a sale, several recurring issues can undermine an otherwise strong business. Identifying these pitfalls early gives you time to address them or at the very least, explain them clearly to buyers. <\/p>\n\n\n\n
An inaccurate valuation is one of the most common reasons sellers leave money on the table or see deals fall apart late in the process. <\/p>\n\n\n\n
Common mistakes include: <\/p>\n\n\n\n
To support a credible and defensible valuation: <\/p>\n\n\n\n
Clear roles and structured processes reduce reliance on the owner by enabling delegation, cross-training key staff and building a capable management team.<\/p>\n<\/div>\n\n\n\n
Buyers are quick to lose confidence when accounting records are inconsistent<\/a> or when monthly management accounts are missing for recent years. This can lead to deal renegotiations with buyers seeking additional warranties, indemnities or retention clauses to mitigate perceived financial risk. <\/p>\n\n\n\n You should be ready to provide: <\/p>\n\n\n\n To support clear and reliable financial records: <\/p>\n\n\n\n If the working capital at closing is higher than the agreed target, the seller receives the difference as an increase in the purchase price. If it is lower than the target, the purchase price is reduced by the shortfall. This protects the buyer from having to inject additional cash into the business immediately after completion.<\/p>\n\n\n\n For example, if a target working capital of \u00a31,000,000 is agreed and the final working capital at completion is \u00a3980,000, the purchase price may be reduced by \u00a320,000 to reflect the shortfall.<\/p>\n<\/div>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n\n
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