If you think it’s time to get rid of your business and you’re thinking about selling it, you’re sure to have the following questions: How do I transfer my business without losing money? Where do I look for potential buyers? How do I announce it?
For whatever reason, if you don’t want to go ahead with your business and think selling it is a good alternative… these are just a few of the doubts that will arise.
That’s why at AYCE Laborytax we’re going to tell you how to trade a business without losing money.
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What is a business transfer?
The first thing to be clear about is what a business transfer is,as many people have serious doubts. Well, basically the transfer of a business consists of ceding your business to anotherperson, including all tangible goods (furniture, products, etc.) and intangibles (customer portfolio, brand, logo, etc.), in exchange for a price agreed between both parties.
In case the business was in a leased premises you should inform the owner of the establishment,as it should give you their consent. If the property were owned, it would be included in the transfer price.
Although, under section 32 of the Urban Leasing Act, if the transfer negotiation is based on the assignment of a lease, you can assign the contract without the owner agreeing. However, you should keep in mind that it could increase the price of the rent, something that would directly influence the final transfer. That’s why we think it’s best to always let the owner of the premises know first.
How to value the transfer of a business?
Once we are clear about what it is, let’s focus on how to value the transfer of a business,since the valuation will depend on the final price of the transfer. For them you must take into account a number of factors:
- Location of the premises: the location of the place will directly affect the price of the transfer. The better located you are, the higher your value. Here we must take into account the area, the influx of customers, public transport connections, parking,… Etc.
- Trade Fund:the trading fund is the ability of the business itself to generate profits, which will depend mainly on the customers, the products or services offered, the attention and prestige obtained over the years.
- Property information: Thecharacteristics of the property will also affect the final price: size, equipment, stocks, licenses, permits, seniority, renovations carried out, state of the facilities, etc.
- Business viability: obviouslya differential factor will be the viability of the business, since the more profitable it is, the greater its value. It is important to collect all ledgers, invoices, number of customers, maintenance costs,… Etc. to be able to offer the buyer the best possible results.
These are the main factors to consider when valuing the transfer of a business. Still, you might not reach an agreement with the buyer. In that case, it would be best to leave the assessment in the hands of an externalexpert, who carried it out objectively.
I want to move my business: where to find the best buyers?
When moving a business you have to look for potential buyers in people who may be interested,such as the workers themselves or even between competitors. Usually the closest environment to the business is where the best buyers are usually, both because they will be the ones who will be most interested, and the ones that will be best able to continue the activity, without damaging the reputation of the brand.
Another option is to publish the transfer of the business on specialized websites or contract the services of a company that is responsible for looking for buyers. The only drawback in these cases is that you will have to give them a commission for their services.
Do I have to pay taxes for the transfer of my business?
Handover is arguably the most beneficial formula for ceasing a business, as there are usually not too many burdens linked to the transfer of a business.
If the business is transferred in its entirety to continue the activity, the transaction will not be subject to VAT,which means that the tenant will be obliged to issue the invoice to the new tenant without VAT. However, if the owner receives a portion of the transfer, it will be subject to VAT and the property owner must generate an invoice with 21% VAT.
On the other hand, goods subject to transfer or transfer if sold separately shall also be subject to VAT. By this we mean goods that are not within the transfer agreement.
As for the IRPF,your taxation will depend on whether you are a tenant or owner.
In the case of a transfer, the lessee must declare what he receives for the lease rights as an equity gain. But if it is a subarnment, it will be declared as the return on real estate capital. And if the tenant is a company, he must tax the profit on corporation tax.
With regard to the Tax on Property Transfers (ITP), if the entire business is transferred it will not be subject to PCR. What will be taxed by the PCR will be vehicles and real estate.
If you’re thinking about going through your business without losing money, here are the things to keep in mind. In any case, if you have any doubts, at AYCE Laborytax we offer our team of tax advisors to help you throughout the process and that you get the maximum possible benefit without making mistakes.