Successfully selling a business requires that you, as the business owner, take a more serious approach. Before you start the marketing process, you need to prepare and organize everything in order. You should start your preparations by making sure that your financial records, books and official documents are organized. You should then consult Tax Advisory Services and make a business evaluation.
When preparing for a business sale, owners also need to prioritize their post-sales financial future, in order to avoid costly mistakes and get the best results. Talking to your tax accountant can help you understand the personal and corporate circumstances that may affect you, as the owner, from sales. Your tax advisor can also help you understand your options in terms of sales structure and the impact it can have on the owner’s personal tax status.
Tax Factors to Consider When Selling or Closing Your Business?
If you are planning to close or sell your business, there are several opportunities for you to make good money at a lower tax rate. This puts your sales revenue under income tax instead of professional income tax return services. However, there are a few other things that our tax advisers recommend to consider:
For more information on selling a business in Victoria please visit Nash Advisory.
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Company Closure
Another way to save tax when you close your company is to keep the profits in your company and open them so that the profits collected can be charged on earning money with a 10% Entrepreneurial Liberty rate, instead of income tax.
To apply this procedure, you cannot engage in the same business within two years after completion. If so, then tax profits will be cancelled due to various laws on avoidance (‘phoenixing’) imposed by the government. These laws were introduced in 2016, preventing direct shareholders from obtaining tax benefits through such methods.
Some low income
Because of the laws introduced in 2016, you may have higher tax rates when you sell your business. One way to reduce this is to sell your company’s assets and keep the payments you receive from the company. This gives you an option to enjoy your retirement savings when your income is expected to fall below the lower tax belts. However, it is possible that the government may take additional steps to prevent this.
Related: Capital Gain Tax is a tax levied on the profits you make when you sell a property that has increased in value. Learn more about CGT in our guide.
Long-term planning
Another way to reduce your taxes, when you sell your company, is to plan for the long term. One way to do this is to use tax and NI payments to pay for termination of employment. These laws have been updated recently, in 2018 for tax and in 2020 for the NI, so it is unlikely that they will face many changes soon. Updated taxes and free NI lease payments allow for up to £ 30,000.
The value of your business is determined by the decisions and actions you take in its development. Watch this video to learn more.
Retired Directors
Redundancy of directors may not be a common way to save taxes. However, if you do not work for the next business, when you sell or close your company, you can use the tax and NI-free tax mentioned above. However, you may need to accept steps to build a waiver right, as administrator rights are much lower than those of other employees.
Define – Subsequent Business: A successive business is formed after the sale or consolidation of an existing business. A newly formed company can continue the operations of the previous company, continue to sell its products and services and operate in the same location.
Director’s Right to Redundancy Pay
Unemployment pay hinges are on their salary and how long they work for the company. However, in order for a director to qualify for overpayment, they must have a contract of employment and be paid a salary. This is often a problem because direct shareholders do not have an employment contract as it enables them to avoid lower wage and pension registration rules.
