Closing or Selling Your Business

Selling your LLC business

After careful consideration, you may decide to sell your business. Sound planning can help ensure you cover all your bases.

Use business valuation to set a monetary value before marketing to prospective buyers. You can do a self-evaluation and learn more about the resources for business valuation appraisals from The Appraisal Foundation.

Accurately value all property and real estate tied to your small business. This can include intangible assets like brand presence, intellectual property, customer information, and projection of future revenue.

When you’re figuring out how much your business is worth, consider these common valuation methods.

  • Income approach: Looks at projected revenue and accounts for potential risks.
  • Market approach: Compares your business to other similar businesses that have recently sold.
  • Assets approach: Subtracts total business liabilities from the total value of all assets.
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Make a sales agreement

You must prepare a sales agreement to sell your business officially. This document allows for the purchase of assets or stock of a corporation. An attorney should review it to make sure it’s accurate and comprehensive.

List all inventory in the sale along with names of the seller, buyer, and business. Fill in background details. Determine how the business will be run prior to close and the level of access the buyer will have to your information. Note all adjustments, broker fees, and any other aspects relevant to the terms of agreement.

Don’t leave out any assets and liabilities, or this can create problems even after the sale has been finalized.

Transfer ownership

Many small business owners will face a time when they need to transfer their ownership rights to another person or entity. You’ll have a few different options available for doing so.

Outright business sale

Jeena owns a local clothing boutique that hasn’t performed well. With several other businesses on her plate, she can no longer afford to continue running it. She needs a quick exit and quick cash.

By selling a business in full, you will transfer ownership immediately and receive payment right away.

Gradual sale

Tom owns a market near his home. After the birth of his granddaughter, he now spends most of his time at his daughter’s home several hours away. After transferring business ownership, Tom no longer has to worry about running his business but is still receiving a monthly income.

This option often benefits individuals that can’t afford an outright sale, but instead are able to finance a long-term payment plan. A gradual sale is a flexible option for transferring a business.

Lease agreement

Mary has decided to take a year-long cruise around the world. To take care of her day care center she’s decided to transfer ownership to a friend through a lease.

By transferring your business ownership through a lease, you’ll commit to a contract that details the conditions and payments you’ll receive for the temporary rights to the business.

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Other considerations when selling your business

Transferring ownership of a family business may have legal impacts, such as estate and gift tax obligations imposed by the IRS. A transfer of property would also likely require taxation.

It’s also important to understand how to approach the exit strategy based on business type. You may want to consult with a lawyer to see which additional rules could apply.