Is it time to close your construction business?
Perhaps you're ready to close your business and retire, taking time to enjoy the fruits of all your hard work.
Or maybe your business has grown to the point that you have to take on partners to keep up with growth, but you don't want to compromise your business vision.
Or it could be that you are ready to start fresh. You're looking to changing your construction specialty and profits from selling your existing business would be the perfect start-up capital to get things going.
Whatever your reason, the thought of selling your construction business can be daunting.
Don't worry! It doesn’t have to be.
Here are some simple guidelines to either sell or close your construction business.
You'll have to decide what is the most sound decision for your company. Once you know whether you want to move ahead with closing or selling your business, the following steps can help you through the process.
Closing your construction business can be a difficult choice to make. It's been your labor of love for a long time and it's hard to imagine moving on.
However, it's not a choice to make alone. Be sure to talk to a business evaluation expert as well as your attorney before taking the leap. You also may want to consider consulting bankers, accountants, or the IRS before moving forward with closure.
Once you know it's the right move for you, the following steps will get you through the process:
Make sure all vested parties agree to close.
If you're a sole proprietor then you're good to go, but if there are any partners involved you must all sign a written agreement in order to close your construction business.
File official dissolution forms.
Failing to legally dissolve your corporation or LLC within your registered state(s) could end up sticking you with continued taxes and required filing.
Cancel all existing business names, licenses, registrations, and permits.
Doing so will help protect not only your finances but also your reputation by separating yourself from any of the above items that you will no longer be associated with.
Be in compliance with all labor and employment laws.
When closing down your business, you're required to give ample notice to those in your employ and -- sometimes -- compensation. Be sure you know what this means for your construction business.
Wrap up all of your business-related financial obligations.
This means not only canceling your EIN, but also notifying both federal and state tax agencies of your business closure. Be sure to take care of all final income and sales tax returns that are related to your construction business and be sure you follow IRS guidelines for closing your business.
And finally, keep records of everything.
Be sure you keep thorough tax and employment records for up to seven years in case you are legally required to provide them for any reason.
Deciding that it's time to sell your construction business is a big choice. Once again, don't make it lightly.
Be sure to consult with legal and financial advisors prior to making to leap, also ensuring that all partners are in agreement on the sale.
Once you've decided to move forward with the sale of your construction business, take these steps to ensure a smooth process:
Set a price.
The first step in the sale of your construction business is choosing the sale price. Do a self-evaluation of your business' value, but also consider bringing in a qualified appraiser to give you a realistic estimate.
Place an accurate value on your construction business.
All real estate and property owned by your construction business -- including intellectual property, customer information, brand presence, and future revenue projections -- should be taken into consideration when choosing a price tag for your sale.
Utilize common valuation methods.
An income approach considers both projected revenue and potential risks associated with your business, while the market approach compares your business with similar businesses that have sold recently. Alternately, the assets approach totals the value of all your assets and subtracts out the total of liabilities your business faces.
Create a sales agreement.
This legally binding agreement is necessary to officially sell your business and should list all inventory involved in the purchase as well as names of the buyer, seller, and business. Include all aspects of how the business will be run prior to the official transfer as well as the amount of access the listed buyer has to your information.
Be sure everything that is relevant to the terms of the agreement -- including broker fees and adjustments -- are listed and that no assets or liabilities are left out of the agreement. Be sure an attorney thoroughly reviews your sales agreement to ensure it is not only accurate, but that it is also completely comprehensive.
Transfer ownership of your business.
When the time comes to transfer your business to the new owner, you have a few choices in how to move forward:
Note: When transferring your construction business to a family member you may incur estate and gift tax obligations.
When you decide it is time to close or sell your construction business, be sure you take the right steps to not only make the process easier on yourself but also to ensure that you're in legal compliance.
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