You started your company with dreams of making millions. Now you are thinking about a business exit. When the time comes to business exit , you will want to keep as much after tax dollars as you possibly can in exchange for your business. Advance preparation can make a big difference in the amount you pocket after the sale of your business.

Consider this. Under prevailing tax rates, Owner A sells a service for $1 million in cash and nets $800,000 in after tax proceeds. Owner B likewise exits his/her business for $1 million in cash, yet just nets $500,000 in after tax proceeds. The difference in the cash you keep has whatever to do with the type of ownership and elective tax status, the nature of the transaction, and the tax structuring that you and the buyer agree upon.

Yet, all companies will experience a change of ownership and the only question is how well prepared the owner is for his/her business exit.

Your Business Exit Planning

Sometimes, this will be involuntary and take the form of a bankruptcy or closure. Nevertheless, in the vast bulk of cases, it will result in the owners getting considerable amounts of cash as they transfer the earning power and good will of their company to others.

Since there is not a centralized database that tracks all kinds of transfers of privately owned business ownership interests, the annual rate of shifts of ownership can just be approximated. Nevertheless, from prior research on the topic and representation to those who exit their privately owned companies, we estimate that in between 6% and 7% of all privately owned businesses have ownership modifications each and every year. This means that the average period of ownership is around 13 years. The huge bulk of these transitions will involve the sale and transfer of all prior ownership to brand-new ownership upon business exit.

For the most part, the owners will have invested years running their organizations on an everyday basis to create both individual income and earnings. Unless they prepare for the day of business exit, they may not keep enough of their earnings from their blood, sweat and tears,

Yet remarkably few company owners have actually assembled the needed plans for (a) when they choose to business exit, or (b) how to maximize their after tax dollars when it comes time to transition the ownership of their companies.

Successful Business Exit Plan

Though an exit strategy should preferably belong to an initial business plan, it is never too late to end up being informed about all aspects of how to unlock the concealed worth of your business and convert it to cash when the time comes to sell. In the above $1 million illustrations of the sale of two various services, the tax savings are apparent. However, what is not obvious is a true understanding of the time tested procedures of getting buyers to pay you what your company is really worth. The procedure of successfully transitioning business ownership involves a series of steps that consist of the following:

• Understanding your individual objectives and financial requirements prior to business exit
• Realistically figuring out today worth of your business
• Understanding what can and will affect its future value
• Figuring out the very best market timing to move forward
• Properly "packaging " your company
• Understanding how to discover the very best possible purchasers
• Economically certifying purchasers
• Finding a lender for your purchaser so you can get cashed out as you business exit
• Reaching agreement on the settlement of details
• Preparing appropriate legal documents in a time and cost-effective manner
• Realistically examining your post-closing obligations, such as training or shift consulting
• Really closing the deal
• Understanding how to best notify workers, consumers, vendors and others after the transaction has closed.

Exiting With Maximum Value

Most of the times, business owners only go through the sale process once and thus can not develop knowledge through succeeding deals. Hiring a professional organization to look out for you during your business exit can be very profitable.