How To Sell Part of a Business

If you decide to sell off part of your business, you may want to look into taking some business finance classes online first. Selling part of a business need not necessarily mean relinquishing total ownership over the business. Companies often sell or hive-off parts of the company for a number of reasons including, raising capital, setting up a joint collaboration with another company for that part of the business, and of course, if the part or division is unprofitable. As a businessperson, if you are considering selling part of your business for whatever reason, here are some simple ways you can do so.

Step 1

Employee Stock Ownership. ESOPs are a good business strategy for a number of reasons - gaining a competitive edge, providing for business succession, securing tax advantages in corporate financing and as a way to keep the business running in case of employer-employee conflict. ESOP stock is usually held in a trust company as a separate legal entity. Separate accounts will be maintained for individual employees and every year the company pays back some of the principal on its ESOP loan, if financing was used to set-up the ESOP. The company earns tax benefits if 30% or more of its stock is transferred into an ESOP. Capital gains will not apply on the stock transferred if the sale proceeds are invested in domestic securities. If money was borrowed through and ESOP, interest and principal repayments can be deducted and thus reduce the cost of borrowing funds.

Step 2

Initial and Direct Public offerings. Companies use IPOs and DPOs to raise investment capital, with shares in the company being offered to the public for a price. Money raised from the stock market can be used for scaling up the business or diversifying while still retaining substantial control over the working and policies of the company.

Step 3

Business valuation. Before selling the full or part of the business, it is important to get a proper valuation done of the part of the business which is to be sold. Hiring professionals such as business brokers, M&A specialists or Certified Valuation analysts will help you in getting the true picture of the value of your business, leaving you free to decide whether the offers you've been receiving from potential buyers are legitimate and accurate or not.

When selling part of your business, it is important to exercise as much diligence and caution as you would have while initially setting up the business. The methods and means to selling part of the business as described above should give you the starting impetus and further detailed research and advice from professionals - or from instructors providing online business programs - will help smoothen the way in the selling process.


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