Although incorporating a small business requires a considerable amount of paperwork and can seem confusing to new entrepreneurs, forming a corporation can hold a number of benefits for profitable small businesses, experts say. Small business owners often feel the taxman’s pinch when reporting earnings, as the tax bill on a small venture can quickly climb into double-digit percentages. This high tax rate on unincorporated businesses comes from a combination of federal income taxes on the business earnings and an additional self-employment tax depending on the location and country. Different states in Nigeria usually have their various tax requirements, but it is important that you incorporate your small business if you have the wherewithal to do so. Experts note that incorporating a small business/ venture pays and has its way of impacting positively on one’s business. You can visit the Corporate Affair Commission for more details on how to incorporate a firm.
Small business entrepreneurs who do not incorporate typically bear full liability for the business’ obligations. If the business amasses debt that it cannot pay, creditors may take a legal action against the business owner to secure repayment. Similarly, customers or employees who become injured on the business property may pursue claims against the business owner’s personal estate. When a business incorporates, the incorporation becomes a separate and distinct legal entity. This entity, rather than the business owner, assumes liability for the business’ obligations. For this reason, many business owners who incur significant debt or who operate in high-risk industries tend to incorporate as a way of shielding personal assets from liability. PAY ATTENTION: 6 Best Practices on How to Succeed in Managing a Business
Most businesses require some kind of outside funding to get off the ground, and incorporation can help to improve the business’ fundraising capabilities. A corporate structure lends a measure of credibility to the business in the eyes of some investor, as the business owner must register the business with state authorities and complete certain procedures during the incorporation process. In addition, some investors feel more comfortable funding a corporation, as the business’ status as a separate legal entity allows investors to recoup assets from failed ventures. Because owners who incorporate may also be able to raise funds and even attract top talents by issuing stocks, an option that is not available to unincorporated organisation.
Consideration It is important you make adequate considerations and checks before incorporating your small business. Meet with qualified attorneys and know what is required of you before going ahead with the process of incorporation. Although the corporate structure offers a number of benefits to small business owners, entrepreneurs should keep some considerations in mind before incorporating. Many states require corporations a file paperwork and complete various verification procedures as part of the incorporation process, and many states charge corporations to file mandatory annual reports. Finally, corporate officers may still bear personal liability for corporate debts and lawsuits; so, business owners should consult a qualified corporate attorney before beginning the incorporation process.
6 Factors to Consider Before You Decide to Sell Your Business
Not all business owners have the intention to sell at the beginning of their business, as the business grows and conditions like retirement or liquidation set in, many entrepreneur consider selling their business. Before you decide to sell your business, several decisions have to be made to get good returns from it. Selling a business requires a critical thinking process and an adequate planning because decision on the appropriate timing to sell is important for profit making. You also need to consider the reasons for selling your business, the structure and strength of the business.
Although the process could be challenging, complex and emotional due to years of hard work and creative input, you still need to be prepared, most business owners actually fail to make profit from the sale of the businesses, the key to having a profitable sale is to enlist the services of a broker, an accountant and an attorney earlier on to ensure that the businesses are adequately prepared before presentation for sale. You need to convince the buyer that they are making the best choice by buying your business. What you are offering them should be the solution they need and should guarantee the right results. Experts have pointed out some things that you should consider to ensure that your business is properly prepared and eventually sold to the right person at a good price.
Prepare for the sale
Most entrepreneurs sell their business due to constant losses, illness, retirement or partnership dispute, this should not be the main reason because every potential buyer takes precautionary measures and check for signs that the business is not profitable. Therefore, consider your business appeal to potential buyers, its readiness and your timing. Your business must have strong customer base, consistent income figure, a high profit margin, evidence of successful executed contracts and landmarks of growth. Early preparation is important because the fact that the business is valuable does not mean it will attract buyers immediately, its need to be properly groomed to sell at a profitable price. The grooming will help to improve your financial records, business structure and customer base to make the business more profitable. These improvements will also ease the transition for the buyer and keep the business running smoothly years after sale.
Reflect on your potential buyers
Before you put your business up for sale, you need to consider who is likely to show an interest in it. Will it be competitor, a foreigner or someone working with a similar customer base? The reality is that each buyer will be looking for something different so start thinking about attractive attributes of a thriving business at an early stage as it is likely to pay dividends. It is certain that any price that they are willing to pay is driven by what they believe the business can achieve in the future. This is why the presentation of your growth of your growth opportunities is so important. PAY ATTENTION: 6 Mentoring Strategies for Leaders That Want To Make an Impact
Get the services of a broker
However, in other circumstances, an experienced broker who can sacrifice the time for you to keep the business up and running, keep the sale quite and get the highest price because the broker will want to maximise his or her commission will be better. A broker will help you with the complicated planning you will require to do before you put the company up for sale. Discuss your expectations and advertisements with the broker and maintain constant communication.
Make a business valuation
Consultation with experts is critical to reap the fruit of your years of labour. Accept divestment advice to avoid taking unnecessary risk. The next step is to determine the worth of your business to ensure a high asking price is fixed for it. The appraiser will draw up a detailed explanation of the business worth which could be presented as evidence to the buyer. The document which should also contain a list of equipment being sold with the business will bring credibility to the asking price and can serve as a measure for your listing price.
Prepare the important documents
There are number of documents that you should prepare, both before you pursue a sale and after. Create a list of contacts related to sales transactions and suppliers and dig up any relevant paperwork such as your current lease. Create copies of these documents to distribute to financially qualified potential buyers. You should gather all financial statements and tax returns dating back three to four years, depreciation deductions, contributions, interest expense and income and any other items of income or expenses that are important to the business and review them with an accountant.
Negotiation tactics will get you the best business deal. A deep understanding of the buyer’s need will clarify the negotiation tactics to use. You should be able to understand the purchaser’s motives and needs then align yourself with them. Once an overlapping interest has been identified, take advantage of it immediately and build on it. Your tactics should neither be resistive nor combative but should reinforce the linkage, shaping an agreement. Emphasise the strength of the business you are putting up for sale. Act in a self-assured manner and don’t be defensive rather be persuasive. Expressed feeling are irrefutable. A statement like ‘your price is not fair’ will provoke attack. It rejects the seller’s notion of worth. However, statements like, ‘I don’t feel the price is fair enough’ relate your feelings better in a polite manner. Stay calm and be firm in your decisions. Do not be aggressive or emotional because it is a sign of desperation to the buyer.