1 – Selling or giving away your business?
The first question you should ask yourself: Should you sell or give up your business? In fact, this question arises if you have one or more children who are likely to carry the torch. In this case, it is normal for him or her to consider moving your business, for free or for payment. Otherwise, except in the case that you want to give your company, for example to your employees, you will seek to sell it to an outside buyer.
Donating and selling have advantages and disadvantages. Giving up your business allows the child who gets it to become its owner without having to pay anything, except for any gift tax. But on your part, you will not make any profit from it, except to consider donating only a part of the company (for example, you retain ownership of professional premises to lease to the buyer) or only the bare ownership of the shares (you retain the usufruct). And be warned, donating to the company can be complicated if you have many children. Because in this case, you must give goods of the same value to children who do not receive them. And when business is the principal asset of your estate, the gifted child will have to compensate his brothers and sisters during the succession.
Conversely, selling your business will provide you with capital – sometimes the fruit of a lifetime’s work – which can significantly supplement your retirement income. But it can be costly from a financial point of view. In addition, if your company has the form of a corporation, then here you will have the choice between selling goodwill or securities (shares, shares) of this company. Two radically different processes…
2 – Why do we expect?
For your business transfer to be successful, you should expect it. In fact, it is often several years necessary to get the most out of it, find a (good) buyer and, if necessary, connect it to the management of the company, put in place the best legal arrangements and take advantage of the most advantageous tax business framework. Not to mention the time it will likely take you to gently prepare for the thought of breaking up with your job.
3 – How do you rate your company?
Your company’s value assessment will be different if you sell only its goodwill or all of its securities.
In the first case, the value of the goodwill will depend on the result generated by the activity. Knowing that some accounting restatements will have to be done on the income statement depending on whether you are self-employed or under a company. Once the operating result is restated, a multiplier will be applied to it which will depend on the economic situation but also on the sector of your company’s activity (profitability method). We can also take into account the volume of business achieved or moving forward by comparison by analyzing the results of recent transactions on equivalent funds in the same geographies.
If you plan to sell the shares of your company, in other words the entire entity, then two main approaches to valuation are offered: the asset method, which consists in making an inventory of the assets and liabilities of your organization, for its valuation. Economic value Subtract the value of the latter from the value of the first. A profitability method that, like the one presented for assessing business reputation, will have multiple application to the results your company generates depending, again, on practices in its sector of activity or economic prospects.
It is also possible to mix several assessment methods.
4 – Where do you find the buyer?
If you do not intend to pass on your business to your children or employees, then the question of finding a buyer will arise. To this end, you can rely on word of mouth by distributing information to your partners most closely connected with the economic community (consultants, suppliers, consular room, etc.), but you will get better results by using it in the markets. There is, for example, a national exchange, hosted by Bpifrance, on which several thousand sellers and buyers are registered. On the same site, under the heading “Take a Company”, dozens of other exchanges (sorted by sector or region) are also listed.
5- How does the company present to the buyer?
You will have to submit a presentation file that is attractive and comprehensive enough to allow them to get a clear idea of your business and craft an acquisition offer. Most often, the presentation file mainly contains a brief presentation (trade name, legal form, activity, registered office, key numbers), data related to the activity (definition of activity, sector and company presentation, data by value, size and nature of customers and suppliers), and a resource statement Human (organizational structure, work organization, salary costs, etc.) and financial elements (accounts of more than 3 years, auditor’s report of accounts, Banque de France rating, temporary accounts, etc.).
and do not forget ! At the time of the first contacts, you do not know who you are dealing with. While you are submitting sensitive data related to your work, remember to have your interviewer sign a confidentiality agreement.
6 – What is the cost of excise tax?
In addition to immediate taxes on current fiscal year earnings, selling your business will result in capital gains taxes for income tax and Social Security contributions. However, it may be exempt, in whole or in part, depending on the amount of your income, the value of the goods sold, your retirement and/or the length of your detention. Buyer will be responsible for the registration fee.
7 – What is the tax cost of a donation?
Granting stock to your company that is subject to corporate tax will not result in capital gains taxes. The same is true if it is a sole proprietorship, subject to the choice of tax deferral. On the other hand, such donations will generate a transfer fee payable by the beneficiary, the amount of which depends on your relationship with them. However, it is possible to sign up for the “Dotrell Charter” in order to take advantage of the 75% exemption. For this, a certain number of conditions must be respected, in particular the undertakings to hold shares, to exercise a managerial function or even to continue operations.
8 – What will happen to your employees after the transfer?
Rest assured, all business contracts in progress at the time of the sale of your business will be automatically transferred to the buyer. Your employees will retain their seniority, wages, qualifications and benefits under their employment contract (non-competition clause, company car, housing, etc.).
Note: You must inform your employees of any plans to sell your company, and tell them that they can place an offer to buy. And this, in principle, is at least two months before the sale is completed.
9 – What is the income after the transfer?
If you plan to stop all professional activities after sending, you will no longer receive income from your activity. To ensure a comfortable standard of living, it is in your interest to study pension rights (basic and supplementary). And if you find that selling your business won’t coincide with allocating the full price to your pension, you can still activate some leverage to increase the amount (purchasing points and/or quarters, in particular) or for retirement savings. And if, despite these measures, the amount of your resources remains insufficient in your eyes, you can always consider combining work and retirement.
10 – Who accompanies you?
The transmission process, as you understand, is relatively complicated. But to implement it, you will not be alone! In fact, your accounting firm will be by your side from the start to talk about strategy and assessment. Then, he will be able to coordinate the intervention of several specialized professionals: a notary (for the case of your real estate and property), a lawyer (for specific legal and tax issues) or even a business agent or insurance company. Above all else, feel free to ask him as soon as you start thinking!