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How to sell business assets
Business
2 years ago

Business assets are listed on the company's balance sheet as items of ownership and some can be written off as either depreciated or expensed. Business expenses are quite different from business assets.  Business expenses are simply deducted, likewise, long-term business assets like real estate which are different from current assets such asreceivables. On the balance sheet, business assets are listed as past cost and not the value of the market. You will possibly accumulate many types of tangible and intangible business assets in the course of operating your business. Tangible assets include business tools, vehicles, supplies and real estate while intangible assets include trdemarks, copyrights and patents. Some assets might have a shorter lease in the course of your business’ life, while others are worth keeping for the life of the business. Selling off those assets that have a shorter lease might be a viable strategy for your business. Whether you’re looking to make some revenue or even looking to sell your business completely, divesting unneeded assets can put some cash back in your pocket. Normally, sellers prefer stock sales, while buyers prefer asset sales. Making a decision whether to structure an asset sale or a stock sale is problematical because the parties involve benefit from the opposite structures. Stock sale is the buying of the owner's shares of a corporation while asset sale is the buying of individual assets and liabilities. Although there are many things to consider when negotiating the type of transaction, the primary concerns are potential liabilities and tax implications. As concerns asset sale, the seller keeps possession of the legal entity and the buyer buys individual assets of the business. These individual assets of the business can be; equipment, licenses, leaseholds, trade names, goodwill, telephone numbers, inventory, trade secrets, and fixtures. But before the transaction is finished, an asset purchase agreement has to be established. Generally, asset sales do not include cash and the seller naturally retains the long-term debt obligations in a process known as a cash-free, debt-free transaction. Normalized net operation capital is also typically included in an asset sale. Net operation capital often includes accounts receivable, prepaid expenses, inventory, accrued expenses and accounts payable. Concerning stock sale, the buyer buys the selling shareholders' stock openly thus obtaining ownership in the seller's legal entity. An asset purchase agreement differs from a stock purchase agreement in that; title to assets, company shares, and title to liabilities are also sold. In an asset purchase agreement, it is an obligation for the buyer to select specific assets and avoid redundant assets. These assets are classified in a schedule to the asset purchase agreement. Stock sales do not need several separate conveyances of each individual asset since the title of each asset lies within the corporation. To some extent, stock sale is favorable because all the proceeds are taxed at a lower capital gain rate. However, based on a marketplace transaction analysis from the Pratt's Stats database, about 30% of all the transactions were stock sales indicating that asset sales make up part of the remaining percentage. When you decide to close down your business or you want to raise some money, you might want to sell the business assets. In other words, this implies that you will want to turn part or your remaining business assets into cash. Below are some few tips you can use to sell your business or company assets without any stress.

Start by Identifying the Business Assets to sell

The management of business assets is debatably one of the most important jobs of business management. On the balance sheet of the company, the company assets are listed in order of liquidity. Long-term or non-current assets are placed under current assets. Business assets are separated into two sections on the balance sheet. That is, non-current assets and current assets. Non-current assets, also referred to as long-term assets, are assets whose values are expected to last for more than one year. Usually, non-current assets are known as capitalized assets because the cost is expensed and capitalized over the life of the asset in a process called depreciation. Property, buildings and equipment all make up these assets. Current assets are company assets that can be turned into money within one year. It includes things like; accounts receivable, marketable securities and inventory. The value for these assets is just for a short while, nonetheless they are still regarded as business assets. As such, giving an account for these assets is important for the success of the business. Make a list of physical property owned by your business, including any money owed to the business in the form of security deposits, rent and unpaid bills you still hope to collect. The list should contain the business equipment such as printer, computers, phones, credit card machines, and cash registers. Some other items can be office furniture, art, supplies, real estate, vehicles, security deposits with landlords, utilities, or taxing agencies, and prepaid insurance premiums. Try describing each item of the property, the state of their condition and the owner of the property. Talking about the owner of the property, we mean the money that was used to buy the property, since the money can be your personal funds, business funds or even a partner’s funds. You can also sell the company’s intangible property like: commercial lease, accounts receivable, intellectual property such as patents, copyrights, and trademarks, customer list, company name, contracts with suppliers and customers at below-market rates and profitable rates respectably. When selling, record on the list the amount that you have sold a property and the name of the person who bought the property. This is because, having a good record of your property and the condition of the property will protect you in case a creditor later questions your selling of the assets or should in case you have to file for bankruptcy. This information will also be needed for your tax returns. Based on the opinion of most business asset sellers, asset sales generate higher taxes because while intangible assets are taxed at capital gains rates, other hard assets can be given to higher ordinary income tax rates. Furthermore, businesses are taxed twice. That is, upon selling the assets to the buyer the business is first taxed and then the business's owners are then taxed again when the proceeds are transferred outside the business.

Finding a Buyer for Your Business Assets

After identifying your company assets, the next thing to do is to look for buyers of the property. The property that is fully paid for and has not been pledged as collateral for any loan is the property that you are looking for buyers for. Use your business contacts, including appropriate competitors and suppliers, to find buyers. Some of your competitors may have interests in purchasing your intellectual property (copyrights, trademarks, and patents), jobs in progress, your customer lists and company name or brand names. Websites like craigslist, eBay, or bid4assets.com can be used to find buyers for furniture, fixtures, and equipment by listing them on the websites. Search also for websites that specialize in auctions for your business. Hiring the help of a business broker or professional liquidator might be a good idea if you have several company assets with significant value. For an asset value, expect to get less than 80% compared to the price it was bought. You might want to also consider donating items such as worn out equipment and office furniture that will be difficult to sell to charity for a tax deduction. Avoid cheating your creditor but do your best to get a decent price for your business assets. In as much as you want a decent price for your business assets, try to get fair market value for your assets because you have a legal responsibility to your creditors. Remember, the officers and directors of an insolvent corporation have a legal duty to minimize losses to the creditors of companies. So no matter how organized your business is, you commit scam if you sell business assets at below market rates or forget the interests of the creditors. In other words, it is bad selling company assets cheaply and pocketing the money, or worse still, giving away company assets to family members or friends for free.

Establish a well drafted asset purchase agreement

An asset purchase agreement which is a legal documents regulating transactions involving the sale and transfer of assets is very important when it comes to asset sale. The reason why you have to establish this agreement is because the main objective of asset purchase agreement is defining and controlling the company asset sales. Thus assets that are bought should be accompanied with a written asset purchase agreement, so the people concerned have a record of the transaction to keep. In this document, you will find things like the assets sales prices, descriptions of the assets to be sold, time and date of purchase, and the parties concerned. More specific information can also be included by the asset purchase agreement, such as the timing and methods of the payments, rates of interest and other figures. Towards the end of the negotiation stage of the asset sales, the asset purchase agreement is often drafted up in order for the parties to have a final record of their agreement. The document fundamentally operates as a contract, creating legally binding duties on each of the parties involved. The authority to purchase the business asset must be presented by the buyer while the seller must represent its authority to sell the business asset. In addition, the person selling ensures that the buying price of the business asset is equal to its value, and that the seller must not be in financial or legal trouble. However, in this context of acquisition or merger transaction, asset purchase agreements have a distinct set of benefits and shortcomings compared to stock purchase agreement or a merger agreement. In a merger acquisition, the buyer is guaranteed to receive all of the target's assets without exemption and automatically shoulders all of the target's liabilities. With an asset purchase agreement, you have transaction where only some of the assets are transferred and there is possibility for negotiation on which liabilities of the target are expressly assumed by the buyer. You may wish to hire the service of a lawyer if you need help negotiating or drafting an asset purchase agreement. The attorney is going to provide you with legal advice on how to complete the process. Likewise, the lawyer may represent you in court if you need to file a claim or file an appeal with the court.

Secured and Leased Assets should be Dealt with Separately

Any company assets that you pledged as collateral for a loan or debt should be set aside. These assets can be sold only with the permission of the creditor. It is fraudulent to sell loan collateral before the loan is paid off and if you do so, then you may even be punished as if you committed a crime. You must speak to the creditor about how to handle the collateral if you cannot repay the debt you are owing. That is, two of you can decide whether you will give the collateral to the creditor as a payment of what you owe or to sell it with the permission of the creditor, and then give the proceeds to the creditor. Similarly, leased property does not belong to you but the lessor. You have as options to return the property or to assign the lease contract to somebody else.

Acquire Prepaid Insurance Premiums Refunded

Ask for refunds of compensation premiums and liability insurance premiums for your workers, if it is allowed by your policies' terms. Since companies pay workers' compensation premiums in advance due to their payroll estimates, workers' compensation carriers are familiar to regulating accounts each year to return overpaid money, and you should get a refund without a problem. As for liability insurance, it depends on the terms of your policy for you to get a refund.

Hire the Help of Expert in Selling your Company Assets

Most people owning business lack the skill, time or desire to sell off their own business assets. If you find yourself in this position it will be better for you to hire a professional auctioneer and hold a public auction of the business assets, or better still you can pay a business broker a fee to sell off your business assets. Another possibility is to file bankruptcy. When you do this, the bankruptcy trustee will sell your business assets and pay off your creditors with the proceeds. Finally, assigning your company assets and debts to a company that specializes in selling businesses is also a possibility.

With these few tip you are now ready to sell any business asset that you want to, but once you are done selling, if there is money remaining after paying off your creditors follow the rules for making a final distribution of the money to yourself and other owners if any.