Selling your corporation or your business Part 2

Here is the 2^nd part of our blog series:

When selling your business you should look at your valuation and see if your asking price fits in the range of similar businesses being bought and sold on the market.  With the advancement of the internet, it is very easy to search businesses for sale that are similar to yours to see if you are in the ball park asking price.   The asking price may or may not be Fair Market Value and that is up to you. However, the closer it is to Fair Market Value (or less), the easier the corporation/business will be to sell.  If someone just wants to purchase the assets and not the shares, then your tax consequences are higher so you may want them to pay more.  Alternatively, you could give a discount on the sale price if they were to buy the shares vs. the assets.  At the end of the day, it is a sale between you and someone else and whatever price and method you come to agreement with is your decision! 

However, if you are going to sell the business at Arm’s Length, such as to another Corporation owned by you and/or family members, to a trust, or to a family member, then you must sell/transfer it at Fair Market Value to the Arm’s Length party.  Fair Market Value is just a fancy word to determine what it is worth if you sold it on the market today! 

Another thing to mention here is that when you sell your business, it is best to close your current business number with CRA and let the new business owner open a new one.  This would include GST, Payroll, Corporate Tax, and Import/Export accounts you have open.  Along that same line, the minute book must be updated through the sale according to the business sale/purchase contract details.  You may want to keep your minute book and have the new business owner create a new one. 

One more topic to discuss in selling your business is to remember that you can get creative in your deal.  For example, the buyer could give you part cash and part other assets, such as Real Estate, Vehicles, other businesses or anything else that may be of value to you.  Also, if the purchaser does not have all the funds to purchase the business at the agreed price, and they can’t get financing, you could finance the balance of the sale over a set period of time.  These are just a couple examples of getting creative and the ideas could go on and on.  Remember though, it is always best to seek professional advice in doing any business purchases, sales or transfers.  We are here to help so don’t hesitate to contact us!