Business start-up: Do you have to buy the company’s assets or securities?

 

Becoming one’s own employer is often easier said than done. But, in addition to starting a business, business recovery is also a real opportunity for young entrepreneurs. In this sense, two options are possible: buy back the business or buy back the company’s shares. Before choosing the professional project in which one wishes to embark, it is better to measure the consequences of each modality.

Redeem the business

The goodwill is all the assets of the company. There is :

  • tangible assets such as furniture, machinery and equipment, stock of goods, etc.
  • and intangible assets such as trade name, patents, customers, software, etc. Note that the assets also include the contracts automatically transferred: lease contract, employment contract, insurance.

Thus, repurchasing the business is tantamount to buying the items recorded in the assets of the company’s balance sheet or simply what the company owns.

Purchase of goodwill: Advantages and disadvantages

First, it is often difficult to define what is left to the buyer and what is left to the company, including payments received from customers or the settlement of suppliers on ongoing transactions.

Secondly, it is necessary to sign a security deed of assets between the transferor and the purchaser to protect their situation from the date of transfer of the business. Subsequently, if there is a decrease in assets whose causes pre-date the purchase, the purchaser can be insured.

Third, since liabilities are not sold, the price of the business may be more expensive. In addition, it is up to the buyer to pay VAT on the stock of goods if it is subject to the actual regime.

Taxation on the acquisition of a business

Acquisitions of goodwill under $ 23,000 are exempt from registration fees. Beyond 23 000 $, these amount to 3% up to 200 000 $. They increase to 5% beyond.

Redeem the company’s shares

Redeem the company

The securities designate the shares bearing on the capital of a company. They may be held by a partner, a member of a cooperative or a mutual company who are the owners.

Thus, the repurchase of the securities of a company amounts to buying all the constitutive elements of the balance sheet: assets and liabilities.

Title Purchase: Pros and Cons

In the first place, by buying back securities, the buyer may face unknown debts that appear after the date of transfer.

However, to guard against this risk, it is preferable to sign a guarantee of liability (and why not asset) between the two parties. This warranty is designed specifically to protect the buyer, especially against the increase of its liabilities. Therefore, if an event impacts on its liabilities, the transferor is liable to the buyer.

Secondly, the price of securities may be lower in the presence of liabilities. However, it is still incumbent on the purchaser to pay the registration fees, the rate of which varies according to the legal form of the company.

Taxation on the acquisition of company shares

In the case of a purchase of securities, one distinguishes the shares and the shares of company:

  • Registration fees on the acquisition of shares, mainly SAS and SA, amount to 0.1% of the amount acquired.
  • For SARL and companies whose capital is divided into shares, these rights are 3% of the amount acquired. As for goodwill, a deduction of $ 23,000 is still planned.
  • For predominantly real estate companies (SCI but not only), the registration fee is 5% of the amount acquired.

In conclusion: redemption of business or securities?

In conclusion: redemption of business or securities?

The advantage of buying back the business is that it avoids all the worries related to the company’s previous management. In addition, it is safer, because debts and debts remain in the hands of the seller. For the buyer, it is simply necessary to precisely define the content of the business he wishes to buy back.

In addition, it must be said that the repurchase of securities is simpler than the purchase of goodwill. It does not bring about any change in the functioning of society. Everything is as before the sale, and the contracts in progress are continuing. Associate current account debts, bank loans are still due by the company after the sale of the securities. On the other hand, it is the owners and, in most cases, the managers who change. As the repurchase of the business, the repurchase of securities can be partial.

Therefore, given the legal and tax issues, it is difficult to advise to buy back the business or securities during a takeover of a company. If the contractor can not decide, it is better to consult a specialized consultant to ensure that the future of the professional project is assured.