How do you sell a business as a going concern?

What does it mean selling a business as a going concern?

Firstly, selling a business as a going concern means that all employment contracts or contracts outsourcing certain functions of the business will be transferred under the same conditions from the previous employer/owner to the new employer/owner.

How do you sell a going concern?

Selling your Business as a Going Concern

  1. The assets must be sold as part of the transfer of a business as a going concern.
  2. The same assets must be used by the buyer with the intention of carrying on the same kind of business.
  3. There must be no significant break in trade.

How do you calculate going concern value?

How to calculate the value of a going concern

  1. Net worth of the business – liquidation value of the assets minus the liabilities.
  2. Your present earning power – annual earnings with an equal amount of net worth (say 15%)
  3. Add a reasonable annual salary for owner or manager.
  4. Average earnings required (item 2 plus item 3)
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How is the sale of a business taxed?

How are Business Sales Taxed? Business sales are taxed based on your capital gain. The capital gains tax rate will be the same as whatever tax rate you pay on your ordinary income taxes. Capital gains are treated as income.

Why would one want a sale as a going concern?

There are many reasons but the primary one is to allow the buyer to avoid any contingent liability in the business. If you buy the shares of a company, you take over the legal entity, and become responsible / liable for that legal entity going forward – and backwards.

How much tax do you pay when you sell a business in South Africa?

The corporate tax rate in South Africa is a flat rate of 28% for all companies (27% from 1 April 2022).

How do I value my business?

Price earnings ratio

The price earnings ratio (P/E ratio) is the value of a business divided by its profits after tax. You can value a business by multiplying its profits by an appropriate P/E ratio (see below).

Can I sell my business as a sole trader?

If you are a sole trader, you can sell the business or its assets, or form a limited company, transfer the business to it in return for shares in the company, and then sell those shares – which now, of course, carry control of the company that owns your former business.

What happens to employees when a business is sold as a going concern?

Now, when a business is sold, the contracts of employment of the existing employees are automatically transferred to the new employer. When a business is sold as a going concern, our labour laws protect certain rights of the employees of the old employer when they are transferred to the new employer.

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Which is better as a going concern valuation?

Going-concern value is the idea that a company will continue to be in business and be profitable. Goodwill is the difference between going-concern value and liquidation value. Going-concern value is often higher than the liquidation value.

How do you determine a company’s going concern?

How to Assess Going-Concerns

  1. Current ratio: Divide current assets by current liabilities to get the current ratio. …
  2. Debt ratio: Total liabilities divided by total assets provides the company’s debt ratio. …
  3. Net income to net sales: This ratio measures how well the company is managing its expenses.

Is a going concern good or bad?

Is a going concern good or bad? A going concern is considered good for the time being. It means your business is facing financial distress but is still able to make payments to keep it operating.