Have you recently come to the conclusion that you’re ready for some much needed R&R? It may have been a difficult decision to make, but if you’ve decided to sell you business, then Campbell Stewart has some tips to offer. Stewart, the once proud owner of two A&W restaurants in Canada has recently sold both of his franchises. After his daughter declined interest, Stewart sold both of his burger joint franchises (one in British Columbia, the other in Kitimat) to a man who was already quite familiar with the business. Find out how!
Getting the right kind of deal
For Stewart, selling his two franchises was rather easy. Not only was a friend of his behind the purchases, but the man was already involved in the A&W restaurant business. But that wasn’t the only thing that aided Stewart in getting a good deal; the deal was a “share sale” deal, which seems to be the appropriate route for small business owners.
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A share deal refers to a type of transaction that transfers all parts of the incorporated business for sale to the buyer. Of course, there are both pros and cons associated with this specific type of deal, but it’s typically better for the seller from a tax perspective. There is a tax exemption that covers up to $800,000 of capital gains from the sale of a qualified small business.
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This specific deal helps showcase how important it is for small business owners to ensure that there is in fact a tax strategy behind the sale of their company. However, this often becomes an issue, as many Canadian small business owners don’t have a proper succession plan. Therefore, it’s important to have an exit strategy. As of now, only 40 percent of business owners are reported as having a plan for exiting their company.
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Making a “to do” list
To help the process run a little smoother, it will be important to make a “to do” list. First things first, small business owners will find it necessary to find the best tax and financial advantages at the time of the sale. Speaking with an accountant will be very important. Owners may also wish to consider taking assets, including investments and real estate out of the company. This process will allow owners to stay on the right side of the Canada Revenue Agency capital gains exemption rules. This could also help make it easier to sell the business.