If you run a business and own - rather than rent - its premises, you may wonder what you should do with that land or property if you decide to sell your company.
This is a difficult question, and depends heavily on a number of factors, including the nature of the business you run, the reasons behind the sale and the likely preferences of potential buyers.
In this article, we’ll explore some of the pros and cons of selling your business-related property along with or after the business itself. We’ll also provide a little advice on what to consider before you move forward with your decision.
Pros: Why Should I Sell?
An Immediate, Full-Size Payout
If you’re hoping to get as much capital as you can out of the sale at once, selling your premises - whether to the party purchasing the business or to another buyer - may be the smartest move.
You might decide to do this if you have a major expense coming up; whether you’re footing the bill for some significant legal fees, heading for retirement with your eye on a high-value residential property in which to spend your life post-work or anything else besides.
A Smooth Sale
It may be that the business you are selling relies heavily on the unique amenities and features offered by the land on which it sits, or benefits significantly from the design of the building that houses it.
If this is the case, refusing to let go of that land or property - either by selling or letting it - could dissuade people from making the purchase.
After all, they will then be forced to find a location that is suitably similar in order to offer products or services of the same quality; something that may prove extremely difficult depending on how unique the existing property happens to be.
This is a clear reason to include the premises in the sale of the business, as you may otherwise miss out on the sale altogether, or at least be forced to lower your expectations in terms of profit.
A Clean Slate
Of course, selling both the company and the land can be a great way to make a fresh start without having to worry about the responsibility of the continued maintenance of any additional property.
It could also be beneficial should you wish to avoid shouldering any responsibility towards the health, safety and wellbeing of anyone utilizing the premises after you have vacated them.
The avoidance of the complexities and stresses that come with this responsibility may be enough on its own to convince you to sell the property once the business has changed hands.
Under the circumstances mentioned above, it is clear to see why the owner of a business’s premises may choose to sell that property upon parting with the company itself.
However, it is worth noting that entirely giving up both the business and its related land and buildings will of course prevent you from achieving any future income from that quarter.
Cons: Why Shouldn’t I Sell?
Future Financial Stability
Retaining the ownership of your business’s premises may allow you to receive an ongoing rental income, supplementing additional financial earnings from a retirement fund or any other source.
An Attractive Purchase Prospect
An intelligent approach to selling your business but retaining and renting out its premises to the new owners is to offer the business itself for a slightly lower upfront price, then charge the buyers a rate to lease its connected premises or land.
This approach makes it a good deal both for yourself and for the company’s new owners, and may render your business more attractive to its potential future owners.
Alternatively, if the new buyers wish to relocate the company you have sold to them, you may choose to rent the land out to the owners of a different organization.
Waiting for a Better Deal
A poor market could constitute another reason to avoid selling the property.
If it seems likely that you won’t get a good return on the sale of your premises or land due to a financial crisis or similar circumstances, you may prefer to wait for a better time to sell, retaining ownership in the interim.
Of course, you may prefer not to sell because you wish to utilize the property or its surrounding land for another purpose.
For example, you might decide to get your property "rezoned" - changing its use from commercial to residential in order to build a house, either for your family to live in or to rent out to tenants.
Alternatively, you may wish to start a new business in the same location after selling your old one - either because the buildings or land you currently have are ideal for this new purpose, or to save time, effort and money seeking new premises.
All of the above are valid reasons to decide against selling your business’s property. However, you must consider the effect of this choice on the potential sale of your business.
In keeping the buildings or land related to your company for your own use, you may make the business itself more difficult to sell - and you could even be forced to accept a far lower offer than you would have liked.
It is worth noting that you will probably be required to pay federal corporate tax when selling your premises, while renting the property out to another company may incur either corporate or income tax depending on your specific circumstances.
This should be taken into account when making your decision, particularly as you may prefer to take the option that incurs the least amount of taxation.
We highly recommend taking all of the above matters into account when deciding whether or not to sell property connected with your business.
However, there may of course be a number of influential factors at play that are unique to your own personal situation - or that of your business or its potential buyers - that only you fully understand.
Naturally, the final decision on whether or not to sell premises or land along with the business itself depends on your own preferences and requirements and situation.
As long as you undertake suitable research to be sure you are making the most sensible decision, your next move is entirely up to you.
The most sensible approach is often to make contact with a financial or business advisor before you make anything official. These specialists will help you to weigh up your options and to fully understand any possible pitfalls or opportunities that you may otherwise have missed.