Do you know how you are selling it?

It is fair to say that when they sell a business, most business owners expect to receive all of the sale price up front. However, that type of sale is very unusual these days. While there may be an initial payment on completion of the sale, it is highly likely that most of the sale price will be paid over a period of time.

This time period is part of the negotiation process, but it can last several years, and be tied to your remaining in the business for a time. It can also be dependent on securing specific future profit or turnover levels.

This protects the buyer from any undisclosed information during the sale process which might negatively affect the viability and profitability of the business, as such issues will be covered in the contract and used to deduct from future payments.

Most business owners expect to receive all of the sale price up front. That type of sale is very unusual these days.

Where the initial payment comes from

It is worth noting that buyers will make an offer for the company on the basis of the most up to date profit and loss and balance sheet statements.

It may well be that some or all of the initial payment is financed from within the existing assets of the agency. There may be cash reserves in the business, or assets that could be refinanced, and funds from these will be used to make payments to you. This is not asset stripping. It is just the way that businesses are often bought these days.

While you might be inclined to remove any excess cash reserves from the letting agency before the sale, there are good reasons why that may not be a good idea. Firstly, the prospective buyer is making an offer based on the declared assets in the business. If you change that asset situation, then the offer might be revised.

Tax, and why you should not rely on what you were told last time

Secondly, depending on your circumstances it may be better from a tax point of view to receive the money as part of the sale price, rather than to take it out of the company as salary or dividends beforehand. Business Asset Disposal Relief may apply. The rates and the conditions attached to it have changed more than once in recent years, so do not rely on what you were told the last time you looked at this.

Get current advice from your accountant on how structuring the sale of your letting agency will affect your tax position. Before you start negotiating you should understand the impact that differently structured deals will have, so that you do not agree to something that does not work to your advantage.

You should also be aware that there will almost certainly be a non-compete clause in the sale agreement. This will mean that you cannot set up or participate in a letting business in the area for a stated number of years.