Featured Image Caption: Selling a Family Business Considerations
When selling a family business in the State of New York, it is important to create a comprehensive succession plan in an effort to avoid typical and potentially damaging mistakes. This article will explore what considerations are key in successfully selling a family business.
Selling a Family Business
Family owned property and businesses are unique. When contemplating whether to sell the family business or keep it within the family, it is important to put in a lot of advanced planning and consideration into the decision. We will explore what an adequate timeline may look like for those deciding to sell their family businesses in the State of New York. We will also discuss how important it is to properly structure the sale and how to create a real estate business plan.
Family Owned Property
How does family owned property come about? Family owned property may be created by families who intentionally join their assets and resources together to make some sort of investments. It also may be created by inheritance, where those who inherit certain property become partners. Oftentimes a business will be the property in question. Unless the business is continually managed by family members, there may come a point where those family members decide the best course of action would be to sell the business for real estate purposes.
Although the physical sale of a business may take mere months, there is a lot more planning that goes into selling a family business than meets the eye. The unique family element of these businesses may make a sale more emotional, which in turn may require more time. It is important to start considering a sale anywhere from 1-3 years in advance. There are many procedural considerations as well that will need time to be addressed, including:
- Look at the balance sheets and clean them up
- Communicate with key vendors or partners about the sale
- Update contracts with these entities
- Renew real estate long-term leases
- Create agreements with management and employees
These steps may seem time consuming and unnecessary. However, taking just one of these steps before initiating the sale of a business can add value to the sale.
Structure of Sale
It can be overwhelming to determine how to structure the sale of your business. Some ways to structure the sale include:
- Lump sum sale
- Installment sale
- Earnout sale
These are just a few of the possible structures. What you choose should be determined by what you are hoping your end result will look like. There are also tax consequences that are unique to these options as well. Unsurprisingly, this is where some advisement from professionals can make all the difference.
Family owned property management may be quite seamless, but selling a family business requires certain expertise that goes beyond the day to day management a family is familiar with. Seeking advice of professionals is the best way to ensure you are structuring your sale in the best way. Investment bankers, accountants, and financial advisors can help walk you through the complexities of determining what kind of sale will maximize the value of your business. Attorneys are also great professionals to consult when deciding and going through a sale.
You will also want to consider what kind of real estate companies to use. A small real estate company may have advantages you want to consider. Larger real estate companies may have more agents in a market, but small real estate companies should not be counted out. These small companies hire the most experienced agents, and they are often more selective. Because a family business is oftentimes more of a sentimental and involved sale, it is important to choose a real estate company that will care about your family and your business. Be careful to consider how the real estate company will take care in your sale.
What is Next After the Sale?
The sale itself is a major milestone. It can change what property your family owns, cash flow, investment portfolios, and the like. It is important to diversify your new assets. The best way to prepare for these changes is to plan for how you will manage these changes in advance of the sale.
New Real Estate Business Models
The real estate industry is constantly evolving. When deciding to sell your family business, you should consider what new real estate business models may work for your sale.
One alternative real estate model has discounted commissions. This reduces the commission percentage below local rates. This can end up maximizing what you earn from the sale. Another is fixed-fee operators where the services are offered for a fixed fee instead of typical commission. Of course, there is a growing trend of for sale by owner alternatives where an owner sells without an agent’s help. This can definitely maximize the value earned from a sale, but it’s important to consider the complexities that come with selling a business. It is important to ask whether enough advice from other experts has been sought so that you feel comfortable proceeding without an agent. In any event, it is helpful to be aware of these new real estate business models so that you can best select what will maximize the sale.
There is a lot to consider when selling a family business in the State of New York. It is important to create a comprehensive plan for the sale well in advance and to consult experts so that you maximize your sale.
By Yuriy Moshes
who is the CEO of Moshes Law and attorney with broad expertise. He has two bachelor’s degrees. Being an experienced expert, he is considered one of the most in-demand specialists in the employment law field. Apart from that, he provides labor law attorney free consultation for everyone who faces discrimination in the workplace.