Sale of Business | Sale of Shares
There are two common ways to dispose of a person's interest in a business. You can either sell the assets of the business or, if the business is operated through a corporation, you can sell your shares in the corporation instead. There are important differences, however, to keep in mind.
Selling the assets of a business means that the desks, computers, rights to the business name, etc are sold to the buyer instead of simply selling the shares in the corporation carrying on the business to the buyer.
From a Seller's Point of View
From a Seller's point of view, if a business has been incorporated, the Seller will usually prefer to sell their shares in the corporation. In many cases, this will result in lower income tax liability and in fact there may not be any income tax payable by the seller in some cases. If, however, only the assets of the business are sold, those assets may have been depreciated on the books of the corporation or business to a point below the selling price or there may be a profit over what the seller paid for the assets. If that happens, the seller will have to declare recaptured depreciation and/or a capital gain on his or her income tax return, resulting in the Seller having to pay income taxes.
From a Buyer's Perspective
it is often more desirable to purchase the assets of a business rather than to purchase the shares. There can be many reasons for this. They include:
Seek Professional Help & Advice
There can be other advantages or disadvantages in buying the assets of a business only versus the shares in a corporation. My point is that if you are buying or selling an interest in a business, you need to think carefully about the way that your sale will be structured. You will need professional help in making this decision. As a lawyer, I will be able to help you with many of these decisions. I also strongly advise you to obtain the advice of a tax professional, such as a chartered accountant, at the same time. A person with only bookkeeping experience will not have sufficient tax knowledge to help. A tax professional may advise you to perform some preliminary restructuring to your business prior to the sale to help you save significant amounts on your income taxes. I can refer you to and help you deal with a tax professional if you do not have one.
Many people will buy or sell a business or shares in a company on an agreement they have prepared between themselves. This may work with a business of very small value but even then, many problems may occur that a lawyer would have helped you avoid. It is very risky to attempt this type of transaction on your own.
Some of the considerations I will help you with if you retain me to help you with your transaction are:
As each transaction is unique, there are also many other considerations that I will also take care of if acting for you as a Buyer or Seller.
Please contact me if I can be of any assistance to you.
Notice: The information on this website is general in
nature only. It relates to Saskatchewan, Canada and may not be
applicable in your jurisdiction. It does not constitute legal
advice to you and no solicitor client relationship will be established.
You should seek specific legal advice regarding your circumstances
from a lawyer entitled to practise law in your jurisdiction.
www.rickcarlson.com | Thu, 03 Sep 2015 07:48:00 CDT1