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In this article:\nWhen to start thinking about a business ownership transition/exit strategy\nWhat’s the best type of exit strategy?\nHow can business structure affect your exit strategy\nHow to make a change in business ownership\nTransferring your business to a new owner, or even closing it outright, can be a lengthy process. This can take even longer if you are passing the business on to an employee or family member who needs to be groomed and trained to run the business before you leave. \nThere’s a lot to think about and it’s good to be prepared \nwell\n \nbefore\n you intend to step down. \nWhen should you start thinking about your business succession or exit strategy?\nFrom the day you start a new business or become the majority shareholder of your company, you should have an idea of how you intend to implement your exit strategy. It doesn’t have to be all planned out from day one, but you should have some idea in mind of what you intend to do when you leave or sell your business. \nWill you sell the business outright? Pass it on to a family member or employee? How will you leave the business for the next owner? Will there \nbe\n a next owner?\nYou don’t need all of the specific details laid out from the beginning, and it’s okay if your plans change as you go along. But it’s important to prepare for your future and to have an idea of when you want to retire or leave the business so you can start planning this important transition. \nYou should start getting things in motion for your plan of exit well before you leave the business— we’re talking at least several years ahead of time. Most exit strategies take a long time from start to finish, especially if you need to train the next owner. \nWhat is the best exit strategy for your business?\nAn exit strategy can, and should, be different for every business. This will depend on the type of business you run and its financial structure (we’ll talk about how your business structure can affect this process below). \nHere are some of the most common business exit strategies:\nAcquisition\nAcquisition, commonly referred to as “merger and acquisition,” is when another business acquires your company. They generally absorb it into their own and continue to offer your products or services as a new addition to their business. \nThis can help the new owner broaden their offerings, stand out against their competitors, or even eliminate you as a competitor. \nIf you know this avenue is something you want to move toward from the beginning, then you can craft your business to be more appealing to potentially interested parties. Just be careful not to cater your business to the needs of one specific company, because they might not be interested in acquisition (or could change their mind) and you’ll have a lot more to lose than gain. \nInitial public offering (IPO)\nIPO is the process of offering the shares of your private corporation to the public. This allows you to raise capital from public investors who believe your company will be worth something to the public. \nThis isn’t always the best strategy for truly small businesses, but for those that grow into franchises or large corporations that the general public will have interest in. And in order to use this process as an exit strategy, you’ll need to sell your individual shares. This is more common among partnerships and large corporations with multiple owners/shareholders.\nKeep in mind that this strategy can heavily impact how you run your business and should be something that you’ve thought about from the beginning. You may need to tailor large business decisions to what the analysts believe will do well if you want the opportunity to take this route. \nManagement buyout\nOffering the business for sale to your employees is a great exit strategy if you want to see your business continue for a long time. Your employees are more familiar with the business and company culture and generally already have the relationships with your customers that they need to be successful in the future. \nThere are a couple of ways you can do this. You can allow an employee (or employees) to buy your company outright, or allow them to finance the company by paying you monthly or annual increments over time. If you go for the latter, be prepared to be involved with the business for a longer period of time during the transition. You’ll obviously want to ensure its success with the new owner so that you get your payment. \nFamily succession\nYou may be interested in selling or legally transitioning the business to the next generation of your family or a younger sibling. Keeping it in the family can preserve the legacy of your business and the family name, but it isn’t without its challenges. \nWhen considering this option, it’s best to look at the people who have been brought up with an intimate understanding of the business and how it operates. You want to sell or leave your business to a family member (or members) who are determined to succeed, particularly if you plan to benefit from any shares of the business during your retirement. \nLiquidation\nIf you don’t have anyone interested in purchasing your business outright, then liquidation may be the best route. This is when you gather all your valuable business assets (like land, equipment, your building) and sell them. \nLiquidation often occurs when businesses are facing bankruptcy or other financial hardships and need the money quickly. If you aren’t facing financial challenges, it may be worth holding out for a potential buyer. \nHow business structure can affect the sale of your business \nThe structure of your company can affect how you are able to pass on the business. So this is important to keep in mind as you build your business and plan your exit strategy. \nLet’s talk about the basics of how your business structure can impact the transfer of ownership for your business:\nSole proprietorship\nIf you are a sole proprietor or the sole owner of an LLC, then you can’t technically sell the business, but only its assets. This can include the branding, customer lists, equipment, etc. \nThis is because the ownership, in this case, cannot be transferred. The current business will be dissolved and the new owner will have to register it as a new business. \nPartnerships\nIn a partnership, at least two owners share interest in the company. In order for one partner to leave, they will need to sell their interest in the company. This can be split among the remaining partners, or a new partner can be brought in if this is agreed upon by all the partners. \nThere may be more documentation required in this process, especially because most states have regulations on partnerships and you’ll have to register any change of ownership according to your state guidelines. \nLimited liability company (LLC)\nLLCs with multiple owners work similarly to partnerships when one of the owners is retiring or wants to sell their percentage of the company. The member buyout is generally laid out in the company’s operating agreement from the beginning. The remaining owners may buy out the leaving owner, in which case a new agreement would be written up and registered with the state. \nSole owners of an LLC, as we mentioned above, will need to value up assets and sell them, rather than transferring ownership. \nC corporation\nC corporations generally have multiple shareholders that own stock in the business. Ownership is based on the number of shares that each owner holds. Because a C corporation is set up this way, the owner may have the opportunity to offer their stocks to the public through an IPO or to sell their shares to the remaining owners. \nS corporation\nS corporations are similar to C corporation except for the fact that they are taxed differently and can only have up to 100 shareholders (where C corps can have an unlimited number). S corps often have bylaws that restrict who the shares can be sold to. Because of this, shares are often sold within the company rather than be opened up to the public or to another company. \nBasics in the process of making a change of business ownership\nThere’s a lot to consider when it comes to making a change of ownership for your business. You have to gather up your assets, documentation, create a sales agreement, and set a date for all of this to be done by. \nIt can quickly become an overwhelming process. We recommend seeking the assistance of an experienced business attorney to guide you along your plan of succession. \nThere are a few main steps that you’ll need to take throughout the process. Be sure not to skip any of these. (This is where an attorney can be particularly helpful.)\nNondisclosure agreement\nBefore discussing any important details of your business, how much specific assets are worth, customer details, etc., you’ll want to have a nondisclosure agreement in place that ensures your information is protected from being used by a potential buyer outside of purchasing your business. \nIndication of interest\nOnce the buyer and you have done due diligence and valued the company (or its assets), the buyer then submits an “Indication of Interest” that gives a range of value for the purchase. If you like what you see, then you can provide the buyer with more detailed information of specific contracts, customer lists, and financial agreements that you have. \nLetter of intent\nWhen the buyer has this additional information and a fuller picture of your business, they may then provide a “Letter of Intent” in which they offer a specific value for the business. This often discusses the details of the purchase, similar to a sales agreement, however, this letter is non-binding. \nPurchase agreement\nAfter the negotiation process has ensued and everyone and their attorneys have done their due diligence and are satisfied with the terms of the sale, then a purchase agreement is written up and agreed upon by all parties to guide how the purchase will play out.\nThe negotiations and steps it takes to value up your assets can take several months before a purchase agreement ever comes into the picture. And if you aren’t the sole owner and have partners to work with, the process can take even longer because of additional documentation that is involved. \nThese steps are general guidelines and it may be different if your intent is to leave your business to your children or liquidate it outright. Be sure to consult a business advisor and/or a reputable attorney to help guide you through the process.\nA key point is, whatever your plans for succession, you need to be thinking about them YEARS before it’s time to sell, liquidate, or pass on your business. Don’t wait.\nFrom the start of your business to the time when you transfer it to a new owner, it’s important to help your business have every opportunity for success so that you can make the most out of it when you leave. \nSources:\n
\nhttps://articles.bplans.com/types-of-exit-strategies/\n
\nhttps://www.valuepenguin.com/small-business/how-to-transfer-business-ownership\n
\nhttps://www.eidebailly.com/insights/exit-strategy-transition-business-new-owner\n


Small business essentials: How to plan your exit strategy or succession

In this article:\nHave a solid idea\nQuestions to ask\nLaws and regulations\nCreate a business plan and get organized\nInsure your business\nCreate a workspace\nHire employees (if necessary)\nDetermine tax obligations\nHave you been thinking about starting a home-based business? Maybe you’re tired of “working for the man” or you just want the flexibility to create your own schedule and manage your own tasks. Either way, you’ll want to be sure you know what it takes to start a business from home before going all-in. \nFollow along as we guide you through everything you need to know to start your home-based business. From laws and taxes to some of the more fun things like hiring employees and creating your home office, we’ll help point you in the right direction. \nBefore you start a home-based business, you need a solid idea \nOf course, you can’t start any business without a killer idea. You need a business idea that people are actually willing to spend money on. Maybe you already have that idea, or maybe you’re at ground zero and still thinking about what you can do. \nConsider these questions to help you come up with your business idea:\nWhat do you enjoy doing? \nWhat talents do you have? \nWhat skills can you offer that others are willing to pay for?\nWhat is something you could easily offer while working from home?\nWhether you can offer a service or you have a great product that will help your customers, make sure to round out your idea in a way that you can sell it and actually make a profit. \nQuestions to ask before starting a home-based business\nOnce you have your awesome business idea, there are a few key questions you’ll need to think long and hard about. \nWill a home-based business work with your lifestyle and residence?\nThe idea of having a business from home is appealing, but you need to make sure it realistically works with your current home life. Are there too many distractions in your home to get the work done that you need? Is there a separate space where you can work and keep a good work-life balance?\nGo deeper: \nAdvantages and disadvantages to starting a home-based business\nyoung woman with dog working from home\n\nWhat are the startup costs going to be for this business? \nHome-based businesses can have relatively low startup costs depending on the type of business you want to run, but it sure isn’t going to be free. Make sure that you are equipped to handle these costs at this time. \nLearn more: Check out our helpful guide to \nfunding options for starting a small business\n.\nWhat is a realistic income that you can make with this business?\nStarting your own business is awesome, but if it’s not going to quickly provide at least the income to support itself (and ideally more) then it may not be the best investment for you. \nMake sure you have enough to live on until your startup budget runs dry.\nWhat is the current market like for your business idea?\nMarket research is going to be crucial for ensuring the success of any business, but especially one that is run out of your home. \nThere are potentially unique issues related to retail sales, shipping, warehousing, and taxes for home-based businesses. See below to learn more.\nGo deeper: Find all of the market-related questions you should ask in our article \nmarket research for small businesses\n article.\nLearn the laws and regulations regarding home-based businesses\nEven though you’re starting a business from the privacy of your own home, you still have to abide by federal, state, and local laws and regulations. It will be important for the success of your business to ensure that you know what those laws are. \nCheck local zoning laws\nThere may be local laws the prevent you from being able to run a business out of your home. Check with your city, county, state, and even HOA (if applicable) to make sure your business fits within any local requirements. If you’re starting \na small business in a small town\n, you should also ask around to see if your community has additional requirements or restrictions.\nIf it doesn’t, that doesn’t mean you should give up. You may just need to \nfind a commercial space\n to start your business from. \nPick your business structure\nYou need to identify your business structure. This will help determine what your tax obligations are and it will have implications for your startup and other liabilities. \nThe basic business structures that may apply to your home-based business include:\nSole proprietorship\nLLC\nS corporation\nLearn more: \nHow and when to incorporate your small business\nGet your tax IDs\nIf you choose to incorporate your business as an LLC or S Corp, you’ll need to acquire an employer identification number (EIN). Your EIN is issued for tax reporting purposes. You may also need a state tax ID number depending on where you are located. \nAs a sole proprietor you can choose to use your social security number or get an EIN. \nTo get your EIN, you can go to \nirs.gov\n and apply for one by filling out form SS-4.\nGet licensed\nCertain types of businesses are required to have licensing and permits. Check federal, state, and local laws to determine if your business will need any licensing. \nYou can visit the \nU.S. Small Business Administration\n (SBA) to apply for the permits and licenses you might need. \nCreate a good business plan\nInvestors, banks, and potential partners won’t take you seriously unless you have a solid business plan. \nIf your idea and business are completely new, it may be somewhat difficult to come up with the projected revenue numbers you’ll need to complete your business plan, but you should do the best you can.\nYou should definitely flesh out your “executive summary” or elevator pitch, company vision, mission statement, market analysis, marketing strategy, and financial projections, and know them by heart.\nGet organized\nWorking from home isn’t going to work if you aren’t organized. You’ll want to develop a clear plan of action for your business and hold yourself to it, as well as engage in tasks such as marketing your business, hiring the right people, and keeping good records. \nGet your business insured\nYour homeowner’s or renter’s insurance isn’t going to cover your business, so you’ll want to take action to get your business insured as you are starting up. There are several business insurance options that you can choose from, depending on your needs:\nLiability insurance\nIf any customers, business partners, or other business-related visitors come to your home for meetings, then you’ll want to have liability insurance. This will protect you and your business from being liable if any injuries or damages occur to your guests while in your home. \nProfessional liability\nProfessional liability is important for protecting you against any claims clients may make of negligence or failure to deliver. \nBusiness property insurance\nHomeowner’s or renter’s insurance doesn’t generally provide coverage for equipment that you use for your business if some kind of disaster occurs. Examples of equipment you may use from home include printer, computer, furniture, products, items related to your service, etc. \nBusiness automobile coverage\nYour regular auto insurance may not cover accidents that occur during business-related deliveries or trips. If your vehicle is used for business purposes, then it is a good idea to look into what your own insurance covers and if you need to pick up additional business auto insurance as well. \nOther possibilities\nDepending on your business, there may be some other insurance options you need to look into. For example, worker’s compensation insurance will cover anything that happens to employees while on the job and commercial crime insurance can protect you from theft and fraud. \nWe recommend meeting with a business insurance professional to help you determine which insurance will be most beneficial for your home-based business. \nFind and set up a workspace\nFinding and setting up your workspace is going to vary a lot depending on the type of business you run. For example, if you’re running a daycare or catering business out of your home you’ll have a lot more requirements for your space than if you were offering web design services. \nThe first step is to find space that you can use and dedicate to your business. Maybe you have a room that will be perfect for your office and client meetings. Or maybe you’re just working from your dining room table. For some businesses that can work just fine. \nFor specific types of businesses (like our daycare and catering examples) you should check with local and federal regulations to ensure that you have the proper space and it meets legal requirements before starting your business. \nclean and neat home workspace for small business\n\nOnce you’ve found your space, it’s time to set it up. We have a few tips that will help you no matter what type of business you are running. \nMake a list of the things you need for your home office\nIt doesn’t matter what type of business you have, you’ll need some kind of office setup and materials for it. This can include any of the following items:\nComputer\nPrinter\nPens, pencils, other writing utensils\nPaper, notebooks, sticky notes\nClock\nCalendar\nFile cabinets\nDesk\nFurniture for any client meetings\nAlso, consider additional needs related to your specific industry. \nGet a phone and email account dedicated to your business\nThe goal of any business is to get leads and customers, and this often comes from phone calls, texts, and emails. \nGet a separate phone that is solely for your business to help you stay organized and keep your home and work life separate. \nCreate a website for your home-based business\nEven small, local, home-based businesses can benefit from a well-built and well-run website.\nRead our article on \nwhy every small business needs to have a website\n.\nBrighten things up with proper lighting\nYou’ll want good lighting in your home office just to work with. But lighting can also help set the tone for your business if you have customers meeting you in your home. Bright, natural light is comforting and more professional. \nIf your home doesn’t allow for great lighting naturally with large windows and overhead lights, you may need to create that ambiance with desk and floor lamps. \nProper lighting also helps alleviate any safety concerns for visitors.\nDetermine if you need additional help\nTons of businesses start out as solo concerns, but as you grow, or if your business plan is aggressive, you might find that you need some additional hands on deck to keep up with the incoming work.\nDetermine the amount of work you are anticipating and whether you’ll need to hire any employees to help you out. You might start small and work alone and then as you grow and get more clients decide to hire another person or two.  \nYou’ll also want to decide if you’re going to have any employees helping you at your home or if they will be working remotely. \nTaxes for your home-based business\nJust like any other type of business or job, you are required to pay taxes on your earnings. Do your research to determine what your tax obligations will be so you can start setting that aside or even paying it out each month. \nDeductions\nYou’ll find that you can deduct a lot of things from your business taxes that you weren’t aware of. We’ve created a list of deductible items broken up into three categories: business, home, maintenance. \nBusiness\nEquipment\nCost of goods \nEmployee pay\nBusiness insurance\nTravel\nOffice supplies\nBusiness use of your car\nMarketing\nTaxes\nInterest\nProfessional services (accounting, consulting, legal, etc.)\nHome\nTo obtain the amount that you can deduct from your home-related expenses for your business, take the percentage of your home that is used for your business. You can divide the square footage of your workspace by the entire square footage of your home. \nUtilities (heating, water, sewage, electric, internet, phone)\nMortgage/rent\nInsurance\nCleaning supplies/services\nHOA fees\nRepairs\nProperty taxes\nMaintenance\nAny repairs, remodels, or maintenance that you make to your home related to your business can be written off on your taxes. \nRecord keeping\nKeep accurate records of all expenses and finances. This is crucial to ensuring a good tax season and preventing IRS audits. \nManaging employee taxes\nIf you have employees on your payroll, it is your responsibility to get the proper documentation from them to process they pay and calculate the taxes that will be withheld. We highly recommend hiring an accountant or finance professional if you do have employees on your payroll.\nTalk to professionals\nIf all of this goes way beyond your ability, you may just want to hire a bookkeeper who can help you out. As a business owner, it’s always a good idea to have a professional at least help you with your taxes during tax season each year. \nImportant note: These tips are general and not intended as legal advice. Every business is different and you should consult with a tax professional to determine the best course of action before submitting taxes for your business. \nClaim your online business profiles\nBefore you sell a single widget, you need to \nclaim your online business listings\n on Google, Yelp, TripAdvisor (if applicable), Facebook, etc. \nWhen customers start reviewing your business online (and they will), these review platforms will automatically create a profile for you if you haven’t done it yourself. You want to be in control. Make sure you claim your profiles and start seeing the benefits of reviews.\nRead our easy how-to articles to get started:\nHow to claim your Yelp business listing\nHow to claim your Google business listing\nHow to create and claim your Facebook business page\nHow to claim your business listing on TripAdvisor\nGo deeper: \n25 free business listings every small business should be on\nStart getting and retaining customers\nOnce your home-based business is started, it’s time to start managing your customer relationships from “consideration” through the sale, and building trust for repeat business.\nYou may have already provided some services for free or at a discounted rate as you were testing out your business. Continue to use these techniques where feasible to help you grow your small business. \nWherever your business operates, it’s vital that you claim your \nonline business listings\n, \nrespond to your reviews\n, and keep abreast of your business revenue trends and customer relationships. 

Everything you need to know to start a home-based small business

In this article:\nWhy set up a pop-up store\nHow to set up a pop-up store\nPrepare, set up the space, and market your store\nPop-up shops are a great way for online retailers to test the waters of running a physical store. Typically, a pop-up shop is a store that opens temporarily to help create brand awareness for a store in a new area or help business owners decide whether or not they want to dive fully into the brick-and-mortar world. \nWhile many pop-up shops run seasonally, you can test out a new pop-up store during any time of the year. In this article, we’ll guide you through some of the things you need to know before getting started. \nWhy set up a pop-up shop for your retail business?\nHaving an online-only store can be a challenge for business owners because it doesn’t allow the on-street marketing or foot traffic that a brick-and-mortar business brings. A pop-up store can increase brand awareness and customer traffic just by being on the ground where people are frequently traveling. \nA pop-up shop also provides shop owners the opportunity to decide whether or not a physical store is something they want to try long-term. Maybe you’ve been considering opening up a physical location for your store for a little while now, but you’re not quite ready to go all in. Try opening a pop-up shop for a month or two to see if it’s something you could sustain long-term. \nEven if you’re not looking to run a store year-round, seasonal pop-up shops are very common and could help give your store more business during busy shopping times (like Thanksgiving and Christmas). \nHow to set up your pop-up store\nWanna test out a pop-up store for your retail business? Follow the rest of this guide to make sure you have everything you need to get started. \nPrepare to open a physical store\nThere’s a lot of preparation that goes into starting a physical business, even if you already have the online part going well. You have to find a space that will allow you to fill it temporarily. You also need to make sure you have people to manage the store and ways to display your inventory. \nFind a space\nAs you find a space for your pop-up store, you’ll want to think about where it is located. Not all locations are equal when it comes to the consumer shopping experience. A store in or near a shopping mall is generally going to perform better than a store in a medical park. Consider your location and audience as you look for a building. \nGet permits, licensing\nAs you look for a space, also determine what kind of licensing and permits you need to run a physical store. Every city has specific zoning for commercial properties. Make sure your building is in a place that allows retail businesses and get any permits that your city requires to set up a physical store. \nSet up utilities\nConsider any utilities that you may need: electricity, water, garbage, internet. Get those set up well before you open up shop—especially electricity and internet so you can take transactions with ease. \nDetermine how you will use the space\nAs you are looking for a space or when you find your space, determine how that space will be used. How will you layout your store? Think about where your inventory will go, where the cashier/checkout will be, if you’ll have public restrooms available, and if there will be space for an employee break room. \nIf you have a clothing store, will you provide a dressing room? Think about all of the different spaces you will need and how those will fit into the building you find. \nCreate materials for your brand\nA physical store requires physical branding. You can’t just rely on your internet presence to get traffic into your store. You need to create and set up signs outside the store and throughout the building to help establish your physical brand. \n(Image)\n\nRent, make, or buy fixtures you may need\nYou’re going to need fixtures to place your inventory on: shelves, tables, racks. You might even want furniture for lounge areas or for customers to use as they try on clothes or shoes. Determine what you’ll need to set up your store and how they will fit into the space you found. \nHire staff\nIf you’re not going to be the only one manning the store, then you’ll need to hire staff. Hold interviews and start advertising open job positions well before the store opens. Your staff can help you get the store set up, and you’ll want to get them properly trained before setting them loose on running your store. \nDetermine payment options \nHow are you going to accept payments? With an online-only store, your customers pay online as they checkout on your website or Amazon. But at a physical store they’ll expect someone to ring them up and take their payments. So you’ll need to have some kind of point-of-sale (POS) system in place to help you manage payments and process transactions. \nYou may even have a current POS like Square or Stripe that provides card readers and tablets to help you take transactions in person. Check with your POS provider to see what options you have available. Or consider \nalternative payment methods\n.\nIn this post-COVID-19 era, also consider using cashless and contact-free payment options whenever possible. \nSet store policies \nBefore you open up shop, set your store policies. Determine your store hours, what kind of parking availability you’ll have, how many people can be inside at one time. Consider all policies and rules that you’ll need to establish with your employees and customers before you open. \nSet up the store\nNow it’s time to set up the space. You’ve already planned your layout, so now you can put that into action. Gather your inventory and furniture items and start getting your store set up. Consider using a local interior designer who is experienced with commercial layouts if design isn’t your area of expertise. \nHere are a few other things to add to your checklist of setting up your store:\nTest your technology. Make sure your POS systems, computers, WiFi, and any other technology are working properly before you open up shop\nKeep a tool kit on hand. Ideally, you’ll have everything in place to simply set up in your store. But it’s a good idea to be prepared with tools, batteries, tape, pens, paper, glue, or other items that could come in handy\nSet up your signs to draw in customers \nMake sure your contact information is readily available for customers, whether that’s a business card, signage, or other visual to invite them to stay in contact\nWalk through the store as a customer, or invite friends in to test out the shopping experience\nMarket your new store\nMarketing your store should really be started before you open and should continue throughout the duration of your store’s existence. Before you get started, make sure that people know you are opening up a physical store. Advertise this on your \nwebsite\n and \nsocial media accounts\n.\nSet up a \nGoogle My Business listing\n so people can easily find your store and business information on Google. \nOffer promotions to draw people in as you open up. Consider a soft grand opening to welcome the community to your new store. \nAs you get customers, remind them that you value their online feedback. This will help bring in more customers over time (should you stay open or pop-up in another location later on).


15 articles found in “Incorporation”

Small business essentials: How to plan your exit strategy or succession

Everything you need to know to start a home-based small business

Small business guide: How to set up a pop-up retail store

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