Realizing a dream of starting a business and earning recognition, money and fame is a way of starting a new business. However, if your business is successful, you can sell it for more profit. As you consider a sale, you must know how to transfer business ownership.
The sale does not mean selling entirely. It can be selling one portion, selling business assets, bringing new partner, partner retirement, and reapportioning the interests of the owner among multiple owners. The ownership transfers, mostly have financial and legal dimension, though it varies with each business structure and transaction type. Thus, they have to work with accountants and lawyers to ascertain the execution is perfect.
Related Post: how to sell ownership of a business?
How to transfer business ownership, what are the methods?
Changing or transferring business ownership depends on the change you wish to make. There are a few ways of giving the ownership of your company, apart from making an outright sale.
If you are selling a private business, the two options are cash financing and owner-financing sale. Cash financing is where the buyer pays upfront for the company using capital savings or a loan in cash after agreeing for the assets on a valuation. While the owner-financing sale is where the buyers get the company in installments as agreed for the business ownership transfer form.
New Partners addition
How to transfer business ownership has another method. It is to bring new partners in as an addition. They will have to pay for ownership interests. In this arrangement type, the newcomers bring in cash, as they are the new shareholders into the company. It will be that they buy the company and transfer the share capital majority.
Also Read: How to Recover After a Reputation Crisis
Giving to a family member
A common question is how to transfer business ownership when it is a family member. It is a question of when it will be handed to a daughter or son. Handing down is tax-free as it is a family business. If you gift your company in regular installments, to your daughter or son within $15000, it is tax-free.
Agreement of Lease-purchase
Entering a lease-purchase agreement for intrepid buyers is a safe choice. It is eligible only through the lease duration to the company ownership. A decision can be anything, whether the buyer wishes to renew the lease, buy the company, or relinquish the control.
A step-by-step process of how to transfer business ownership
On deciding to sell a business, you must begin to understand how to transfer business ownership. Whether it is a corporation, or own an LLC (Limited liability company) and are bringing in a 33 % new partner for a cash price.
Also Read: How to Achieve Your business goals
Step 1: Explore the Regulatory Waters
Exploring the regulatory restrictions is a must before placing the transaction under the state law. There is a need to report the ownership changes in some jurisdictions in your business. It is essential unless the state fails to record in the Certificate of Formation the member names when the company was into its first incorporation. A Certificate of Amendment is to be issued reporting the personnel changes to state authorities if your name was into the records during incorporation.
Step 2: Update Operating Agreement
You may amend the agreement and the internal documents that reflect the management changes. Include the details about ownership change and the investment valuation, where they have notarized documents.
Step 3: Issue Membership Certificate
A new ownership certificate is a must to hand over within the first month and at least half of the transaction specifying that ownership for 33 percent has changed hands. It is a must for the new owner to keep the company books and the certificate safe for further reference.
The methods of how to transfer business ownership for a proprietor business, Corporation, an LLC, Partnerships, C Corporation and S Corporation is different.