Are you looking to sell your business in Canada? There are several things you need to consider and steps you need to take as you work towards selling your business. If you’re looking to sell your business in Canada, it’s important that you’re financially and mentally prepared to have someone else take over what you’ve worked very hard to accomplish. In this blog we’ll cover how to sell your business so it’s beneficial for all parties involved.
How do you attract a buyer for your business?
As you’re getting ready to sell your business, it’s important to find what’s attractive about your business. Understand what your business’ reputation is, what kind of profits your business is bringing in, how many assets your business has, and other items that would attract a buyer for your business. Other selling features may include whether or not you have all star staff, a large list of loyal customers, or you have a strong, established history of your business. When you have the key selling features of your business ready, it’s time to start contacting potential buyers. There are websites where you can post your business for sale, but you can also reach out to those in your network directly. It could be a competitor who wishes to purchase your business, someone from your industry that you know is ready to move into an ownership role, as well as stakeholders in your business who may be interested in owning the company.
Valuation of the Business
Before selling your business, it’s important to have your business evaluated. In order to determine your business’ worth you need to look at earnings history, staff and management, growth prospects, earnings before income taxes and depreciation, reputation, competitive advantages, and size of your business. Read our blog on How to Evaluate the Net Worth of a Business to learn more!
How do you change ownership of a business?
Once you sell your business, you have to legally change the ownership. How this works differs depending on the kind of business you own. There are different legal parameters set up depending if the business is a sole proprietorship, a partnership, or a corporation. If you are a sole proprietor, rather than handing the business over to a new owner, the new owner will need to get a completely new business number and CRA program accounts. As a partnership, changing one member can sometimes be completed without needing a new business number or CRA program accounts; however, there are some cases where the partnership is considered a completely new legal entity and the business number and accounts will need to be redone. If your business is a corporation, you will not be required to close your business number and issue a new one as ownership is changed, but it is important to ensure that the new director of a corporation is validated and on file with the CRA,
What are the tax implications of selling your business?
If you are the original owner of the business, or you are selling to someone who is purchasing at least 90% of the business assets that are deemed necessary for the continued operation of the business, you may be able to forgo GST/HST payment on the sale. It is important to note that in order to have the purchase of your business have no GST/HST payable on the sale that the buyer must carry on the same kind of business.
According to the Government of Canada, you still charge GST/HST on the following items, even if you have made the election to not pay GST/HST on the sale:
- taxable services to be rendered to the purchaser
- taxable supplies of property by way of lease, licence, or similar arrangement
- taxable sales of real property to a purchaser who is not a registrant
Another tax implication of selling your business is that if you sell the shares you own in your small business corporation, you can use your lifetime capital gains exemption. The limit for using the lifetime capital gains exemption is $913,630, so for all the profit you make on selling your small business corporation, you will only need to pay taxes on profit over this amount if you use the lifetime capital gains exemption.
Tips for Selling Your Business:
Selling your business can be difficult. Not only is it emotional as you have put time and effort into making your business what it is, but you also want to ensure that selling your business is profitable and worthwhile for you. Here are a few tips for selling your business!
1. Maximize Your Business’ Value
It’s important to keep track of all the things that bring your business value. Keep track of business wins, profitability, and ensure that you have a developed business plan and marketing plan.
2. Don’t Allow Emotions to Dictate Decisions
Selling your business is an emotional decision, and although it’s supposed to be ‘just business,’ sometimes a perceived slight or small issue can feel much larger. It’s important to not let your emotions get in the way of making the best decision for yourself and the company.
3. Keep Your Records Organized
In order to make for a smooth and easy transition, organize our records and ensure all financial and organizational documents are easily accessible. Not only will this help your buyer perform due diligence, but it will also ensure that you aren’t being met with hundreds of follow up questions after the sale is complete.
4. Market Yourself Well
Make sure you market yourself and business to potential buyers. Talk about the fantastic opportunities available with your business, showcase your great team, and ensure that your client list is attractive to potential buyers. It’s important to not only market yourself as a great investment, but to market yourself to the right people who would be interested in purchasing your business.
5. Have a Great Team in Place
You can’t sell your business on your own. In order to ensure that everything is above board, be sure to have a great team in place including lawyers, insurance brokers and investment professionals, and, most importantly, a Chartered Professional Accountant.
How Gallo LLP can help you sell your business
Gallo LLP is here to help make selling your business as simple as possible. We will be with you during a business valuation, gathering your financial information and reports, and helping you make your business as profitable as possible before you make the sale. O ur team of highly experienced professionals will work with you every step of the way to ensure that the sale of your business is quick, seamless, and beneficial.