Selling your Business

You may have mixed feelings about selling the business and retiring. Indeed some people find that they cannot face retiring, and so just go on, until they die 'in harness'.

But most people want to enjoy a rewarding retirement. Once you have built up your business, you have a valuable asset, which you can sell. It is often true that the goodwill of the business rests with you personally. You have built it up over a number of years. The contacts with your suppliers, competitors and, most of all, your customers, make goodwill very personal.

Despite all that, people realise that you have to retire, and most will go with your business successor.

Planning Ahead

It is always good to plan as far ahead as you can. Make plans for your retirement at least ten years ahead. Decide whether you want to phase out your retirement, or make a clean break. Very often, you may have a good idea of who you would like to take on the business when you retire. It may well be a member of your family - perhaps the next generation. It may be someone who has worked for you - you may even have trained the person to do the job.

Planning in advance gives you and your successor the chance to smooth out the problems that might otherwise arise. Working with the person who is taking over means that you are able to show them all the aspects of the job - the administration and bookkeeping as well as the technical side. You are also able to make sure they build up a good relationship with customers and suppliers.

Handling the Negotiations

Even if you have known and worked with your successor for a long time, you must handle the negotiations for sale in a business-like manner. Get a solicitor to draw up the agreement for sale, and suggest to the other party that they get an independent solicitor to act for them.

You will have to negotiate a price for the business, how that is to be paid, what is included in the sale and what is not, and the terms of the handover. It is quite usual to have a clause restricting the seller of the business from setting up in competition within a certain time period and within a certain geographical area around the business (say, a five mile radius).

You will also have to be prepared to supply information, such as the business accounts for the last five years.

Advertising the Business

It may be that you do not have a buyer ready to take over your business. If so, you will have to advertise it for sale. Some estate agents deal with business sales as well as property sales. There are also specialist business transfer agents who deal only in business sales. They will, of course, take a commission, but they can often get a better price, and have access to a larger base of people looking to buy a business. They will have specialist knowledge of the issues involved in selling a business.

Paying Tax on the Business Sale

The sale of a business is a disposal of an asset for the purposes of capital gains tax. Taper relief was introduced in 1998, to replace retirement relief and indexation relief. It works by reducing the gain liable to tax by reference to the amount of time the asset has been held since 5 April 1998. The taper is more generous for business assets than for personal assets. The maximum time for taper relief is ten years.