3 Key Questions to Ask Your Accountant Before Exiting Your Business

Every business owner reaches a point where they start thinking about stepping away from their business—whether it’s to retire, sell the business, or move on to new opportunities. When that time comes, having the right financial guidance is essential. Your accountant can play a vital role in helping you plan a successful exit. Here are three important questions you should ask your accountant to ensure you’re ready for this major transition:

1. How Can I Maximize the Value of My Business Before I Sell?

Selling your business is one of the most significant financial moves you will ever make. To get the best price, it’s important to ensure that your business is financially healthy and appealing to potential buyers. Your accountant can help you identify key steps to improve the value of your business before the sale, such as:

• Organizing your financial records: Buyers want to see clear and accurate financial statements. Your accountant can help clean up your financial records to make them more transparent and trustworthy.
• Cutting unnecessary costs: Your accountant can review your expenses and suggest ways to eliminate wasteful spending. Lower operating costs can improve your profitability and make your business more attractive to buyers.
• Increasing profitability: They can help you analyse your revenue streams and find ways to boost profits, whether through better pricing strategies, more efficient operations, or new market opportunities.
• Preparing for due diligence: Before a sale, a buyer will conduct thorough due diligence. Your accountant can prepare you for this process by making sure all of your financial documents are in order and you’re ready to answer any questions.

By addressing these factors early, you can increase your chances of selling your business for a higher price.

2. What Should I Know About the Tax Implications of Selling My Business?

Selling your business comes with several tax implications that can significantly affect how much you ultimately take home. Your accountant can guide you through the process and help minimize your tax burden by offering strategies such as:

• Understanding capital gains tax: Depending on how you sell your business, the proceeds may be subject to capital gains tax. Your accountant can help you understand how much you will owe and suggest strategies to reduce the tax impact, such as structuring the sale to spread out the tax burden over time.
• Structuring the sale: Whether you sell the business in one lump sum or through installment payments can affect your tax situation. Your accountant will help you choose the most tax-efficient structure for your situation.
• Tax credits and deductions: Your accountant may identify tax credits or deductions that apply to you during the sale process. For example, certain business expenses or losses can offset some of the gains from the sale, reducing your overall taxable income.
• Planning for retirement savings: The proceeds from selling your business may contribute to your retirement savings. Your accountant can suggest tax-advantaged retirement plans to help you make the most of your sale proceeds.

Planning for taxes ahead of time can save you from unexpected financial surprises down the road.

3. What Is the Best Way to Transition My Business to a Successor?

Whether you plan to sell your business to someone else, pass it on to a family member, or transition it to a trusted employee, having a solid plan in place is crucial. Your accountant can help you create an exit plan that ensures a smooth transition. This includes:

• Succession planning: If you’re passing your business on to someone else, your accountant can help you develop a clear succession plan. This may involve preparing the new owner with the financial knowledge and resources they need to succeed, as well as structuring the transfer of ownership and assets.
• Family business planning: For business owners passing the company on to family members, your accountant can help with estate planning and navigate any complex tax issues involved in passing on business ownership.
• Employee buyouts: If you’re selling to an employee or group of employees, your accountant can help you structure the buyout deal and ensure that the terms are fair and sustainable for both parties.
• Retirement planning: If you’re planning to exit the business for retirement, your accountant can help you organize your finances, including how to take income from the sale, as well as how to manage any other retirement savings or investments you have.

Having a clear plan for how your business will transition after you leave is critical for maintaining its value and ensuring its continued success.

Exiting your business is a huge decision, and having a knowledgeable accountant by your side is essential to making it a smooth and profitable process. Asking the right questions and planning ahead can help you maximize the value of your business, minimize your tax burden, and ensure a seamless transition for the future.

To make sure you are fully prepared for your exit, we’ve created a helpful eBook: The Exit Checklist. This resource will guide you through every step of the process, from maximizing your business value to managing the transition.

If you want expert advice tailored to your unique business needs, Breaking the Mould Accounting Limited is here to help.

Contact us today to get started on planning your successful exit strategy. Our team of experienced accountants will work with you every step of the way to ensure that your financial future is secure.