Realizing a dream of starting a business and earning recognition, money and fame is a way of starting a new business. However, if your business is successful, you can sell it for more profit. As you consider a sale, you must know how to transfer business ownership.
The sale does not mean selling entirely. It can be selling one portion, selling business assets, bringing a new partner, partner retirement, or reapportioning the interests of the owner among multiple owners. Ownership transfers mostly have financial and legal dimensions, though they vary with each business structure and transaction type. Thus, they have to work with accountants and lawyers to ascertain that the execution is perfect.
How do I transfer business ownership? what are the methods?
Changing or transferring business ownership depends on the change you wish to make. There are a few ways of giving ownership of your company, apart from making an outright sale.
Selling Business
If you are selling a private business, the two options are cash financing and owner-financing sales. Cash financing is where the buyer pays upfront for the company using capital savings or a loan in cash after agreeing to the assets on a valuation. Meanwhile, the owner-financing sale is where the buyers get the company in installments as agreed for the business ownership transfer form.
New Partners addition
How to transfer business ownership has another method. This is to bring in new partners as an addition. They will have to pay for ownership interests. In this arrangement type, the newcomers bring in cash, as they are the new shareholders in the company. It will be that they buy the company and transfer the share capital majority.
Giving to a family member
A common question is how to transfer business ownership when it is a family member. It is a question of when it will be handed to a daughter or son. Handing it down is tax-free as it is a family business. If you gift your company in regular installments, to your daughter or son within $15000, it is tax-free.
Agreement for Lease-purchase
Entering a lease-purchase agreement for intrepid buyers is a safe choice. It is eligible only through the lease duration to the company ownership. A decision can be anything, whether the buyer wishes to renew the lease, buy the company, or relinquish the control.
A step-by-step process on how to transfer business ownership
On deciding to sell a business, you must begin to understand how to transfer business ownership. Whether it is a corporation, or owns an LLC (Limited liability company) and are bringing in a 33 % new partner for a cash price.
Step 1: Explore Regulatory Waters
Exploring regulatory restrictions is a must before placing the transaction under the state law. There is a need to report ownership changes in some jurisdictions in your business. It is essential unless the state fails to record in the Certificate of Formation the member names when the company was into its first incorporation. A Certificate of Amendment is to be issued reporting the personnel changes to state authorities if your name was put into the records during incorporation.
Step 2: Update Operating Agreement
You may amend the agreement and the internal documents that reflect the management changes. Include the details about ownership change and the investment valuation, where they have notarized documents.
Step 3: Issue Membership Certificate
A new ownership certificate is a must to hand over within the first month, with at least half of the transaction specifying that ownership for 33 percent has changed hands. It is a must for the new owner to keep the company books and the certificate safe for further reference.
The methods of how to transfer business ownership for a proprietor business, Corporation, an LLC, Partnerships, C Corporation and S Corporation is different.
