Can I Sell My Business To An Employee Ownership Trust?
The answer is yes. You can sell a trading limited company, a partnership or a sole trade to an Employee Ownership Trust.
There are many advantages to selling your business to an Employee Ownership Trust. These include:
- You are not dealing with an independent buyer who will probably try and chip the price at the last moment or try and not pay all the instalments due on a deferred sale.
- You can set the price – at market value. It must be independently valued.
- The share sale, if over 51% of the share is Capital Gains Tax free. This is an incredible way to save tax on sale.
- It is good for your employees to own the business. There is less absenteeism and more engagement.
- You can stay as a shareholder and as an employee/director on a market salary.
- It is good for professional service firms that do not tend to have a high goodwill value on sale.
The main disadvantages are:
- The buying Employee Trust may have to pay for the shares by instalments over 5 to 7 years or longer. These are funds from profits.
- You may not achieve the best free market sale price.
- You may need to keep a management time involvement.
Here are some key matters to consider on an Employee Ownership Trust:
- You do not need to sell all your shares.
- You will need to create and Employee Trust document setting out the rules.
- New employees can be made to wait for a probation period before they share in profits.
- Employees who leave do not get a capital payment or a right to the shares.
- Employees can have dividends of up to £2,000 a year tax free.
If you would like to find out more about Employee Trusts please contact David Kirk.