Every small business owner will face a time when they will need to sell their company. When a small business is put up for sale to a third party, particularly in rural areas, local jobs and the other benefits are at risk. Since an acquiring business may not have any ties to the local community, they could liquidate the assets of the company or relocate the company operations to a different location. This obviously has negative consequences for the employees and the community as a whole.
When a business is sold to a third party, the buyer generally prefers to purchase a company’s assets rather than its stock, whereas the seller would rather sell the stock. The decision of asset sale or stock sale is often subject to the negotiation process and is an important consideration when developing your business exit strategy.
Business owners often put off Succession Planning or even contemplating the thought of selling their business because they are not ready to retire or they have not identified or properly trained their replacements. They may also legitimately worry about the loss of control when selling to a third party. Including an ESOP in the Business Succession Plan enables a business owner to sell part or all of their company, Tapping into an Otherwise Illiquid Asset and Providing the Business Owner with Liquidity and Diversification, while remaining in control of the day-to-day operations of the company.