How to model the sale of a business or a business property

A business could be entered either as a property or an investment.  Which option you choose depends largely on how much flexibility you will need when scheduling the liquidation of the business. Another consideration should be whether your client intends to make further investments into the business. Read more >>

Use the Property/Asset approach if your client intends to sell the business all at once. The liquidation will occur based on the event you select as the end event (red dot) on the Time panel to the right side of the screen. Select the Start event as the starting event (green dot) to indicate that the business is owned today, at the beginning of the plan. Proceeds not spent will go automatically into the owner's default cash account (e.g. John's Cash).

Use the Investment approach if modelling one's equity stake in a business, which could be sold off in bits, if necessary. You might schedule the liquidation of business assets held as an investment by scheduling transfers from the Unwrapped Investment into another account such as cash/savings. This can be done under Advanced Settings > Transfers / Additional Contributions.

 

Set the current cost basis for Capital Gains Tax calculations

In either case, be sure to enter in the Purchase Value field the cost basis for the business - i.e. the amount your client has invested into the business plus any gains realised to date - as this will set the cost basis on the investment.

 

Special tax considerations

In either case, you will find on the Investment and Property Assets screens, under Advanced Settings, a Taxation panel. It is on that panel that you will find settings for Entrepreneur's Relief and for that matter, Business Property and Agricultural Property Relief.

 

Related topics

Business (Company) - How to enter a business as a property or an investment