How Do I Sell My S Corp?

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An S corporation benefits mostly those working alone or in partnerships because it limits the amount of personal liability in relationship to the business and its assets. This is something that having a sole proprietorship or a partnership will not do for you.

Timing

  • When you are selling an S corp you have to think about timing. The market has to be right when you put the business up for sale in order to get the most money for it. You will have to consider your own demographics to figure out the best timing for it and perhaps get some professional advice in this case.

    You should watch the market consistently to find the trends. Look at what is happening in the business world and see if other businesses are being sold fairly quickly or if they are just sitting there.

Increase the Value

  • To increase the chance of the S corp selling for a good price, the owners should try to increase the value. Little things that might seem trivial may affect the value in a big way.

    The grounds and the building should be clean, the paperwork should be in order and all of the records should be available. Work schedules and anything else can be included with this package. If there is any type of product competition, you should try and reduce its affect as much as possible before putting the S corp on the market. Extra competition can reduce the value of the business.

The Selling Process

  • Once you have the business valued, you will need to set the price. You will need to consider a few things such as the arrangements for the transaction. If there is anything included in the transaction that means a deduction for the buyer, it usually means that there will be income for the seller. This will then be taxed. However the allocation of the exit transaction can result in capital gain instead of current income so you need to choose how you will undertake this action.

    Hiring a professional to take care of this is a good idea as they can advise you with this. There are tax laws that you will have to abide by and other rules to follow. If not, then you could be looking at legal penalties. These rules are changing all of the time. In fact even in early 2009 the rules have changed regarding the selling and taxing of the S Corp.

References

  • Photo Credit Photos.com/Photos.com/Getty Images
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