Business Brokerage .
Steve Skrlac, MBA, CFA
sales representative
.
Other Costs to Consider When Selling a Business
Here are a few other costs to keep in mind though when you are selling a business. Taxes Employee Severance Costs Business Brokerage Commission Legal, Accounting and other Professional Fees In fact, if the business broker does take issue with you engaging an accountant and/or lawyer, you should find yourself another one to help you sell. Debt Training the Buyers Relocation Selling a business can be an involved process. Be prepared of the other costs involved in the business sale transaction. The above list is only a sample of some of the costs that you might be subject to when your business sells. In addition to a business broker, you should certainly retain the services of a C.A. and attorney to better advise you.
When you decide to sell a business, it is important to determine a fair selling price but you, as the business owner, must also have a fairly good grasp of the other costs involved in the sale. An accountant and lawyer should certainly advise you on these issues.
After you sell your business you may be responsible for paying some taxes to the government. You will likely have to pay provincial taxes to Ontario as well as Canadian federal taxes. Your accountant can go over tax differences such as income taxed at the personal income tax rate and capital gains rates. Also, there are some very important differences depending on if you sell assets in your company or the deal is structured as a share sale. If your business is owned by an Ontario limited company then how earnings or sale proceeds are taken out of the corporation should be examined as well.
If you own a business that you are selling that has several long-term employees there are some important issues you need to discuss with your lawyer. You may be obligated to pay for the severance of your staff up to the date of close. Depending on the number of employees and how long they have been with the company, severance can be costly.
Selling a small business in Ontario through a professional business brokerage professional usually means a commission rate in the 10% range. The commission would be subject to the HST tax.
From before the time you list your business for sale, you should engage the services of a lawyer and accountant to help you through the transaction. These professionals are important in order to advise you and protect you through the sale. A reputable business broker should not have any issue with you working with advisors.
If you have any debt (such as loans, leases or lines of credit) on your business, these (may) need to be paid off at the time of sale – depending on what is being sold, of course. If this is the case, there may also be some costly breakage fees you might be liable for.
If you sold a business and as part of the deal you agreed to train the new owners ‘pro bono’ for a period of a few weeks, this represents a real cost to you. This is time that you may not be working or generating any additional income.
Many business owners sell a business and find that this triggers a move in their personal life as well. For instance, owning a business in the Greater Toronto Area usually means living close to the city. Business owners who sell sometimes find that the ‘freedom’ they enjoy after the business sells means that they would like to move to a different city, outside the GTA. This is quite common, in fact. If you find yourself in this situation, be prepared for other costs involved in relocating.