Selling A Share of Your Business to an Employee

Everyone wants to make money, but not everyone knows how to take an idea and turn it into a business. Luckily for you, if you have an employee that helped grow your company from the ground up, then now is the perfect time to sell them a share of the company.

Selling A Share of Your Business To An Employee – Teach Them About Your Business

After many years of helping grow your company’s revenue and success, you can now reward one of your employees by offering to let them buy a small share of the company. As part-owner, they will learn more about running a business as well as making their own financial future secure even if this job does come to end at some point down the line.

The best part is that selling a share of your company to an employee comes with very few downsides. Employees are usually more than willing to take on this opportunity and it can really be a win-win for both parties involved and the business’s long-term success.

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Selling A Share of Your Business To An Employee – Don’t Forget About Taxes!

Now before you get too excited, don’t forget about all the tax implications that come along with such an agreement. Once you sell a small share of your business to an employee, they will need to pay their taxes like anyone else who earns money from owning part of a private business entity.

However, they will not have to pay their taxes until the company is either at a profit or when you decide to sell them back their shares. This way your employees won’t have to worry about paying anything during the rough times of building up a new business.

In order to learn more about taxation, talk to a professional accountant or lawyer that specializes in small businesses.

Selling A Share of Your Business To An Employee- Prepare For The Future

Instead of letting your employees feel like they contribute only to the company’s success but never actually gain anything from it, think about offering to let them buy into the business itself. This not only rewards them for the hard work and dedication they have put into making your business successful but also helps motivate other employees that may be on the fence about whether or not they should stay with the company.

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Selling A Share of Your Business To An Employee- Benefits To Employees

As an added benefit to selling a share of your business to an employee, they will also be able to take advantage of the many tax breaks that are available for small businesses. Depending on how much you let them buy into the company itself, this could save them thousands upon thousands of dollars every year.

More importantly, instead of thinking about their current job as not being enough or wanting to use their years working at your company as leverage when applying for jobs after leaving your business, they can now think about it as owning a part in making all those future plans possible.

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Selling A Share of Your Business To An Employee- Trust is Key

Although selling a share of your business to an employee has many benefits, it does come with some downsides that you will need to plan for. The number one problem that can arise from such a relationship is if the employees don’t actually carry out their assigned tasks as efficiently as they should have.

While this could be bad news for any other employer, this is not something you should hold against them since they now have a vested interest in the company’s success and making sure it continues on for future generations. On the flip side, be careful about doing anything that might jeopardize their ownership status either.

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Selling A Share of Your Business To An Employee- Keep Your Options Open

On the other hand, having employees that are more than willing to put in the extra effort to do well at their jobs is becoming more and more of a rarity these days. As such, if you’re able to find someone who actually wants to take part in growing your business, you will definitely want to hold onto them for as long as possible.

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Selling A Share of Your Business To An Employee- What Can Go Wrong? Depending on how badly they want to purchase a share of your business or how much money they have saved up from buying into your company could mean the potential for them to do well in their job and help grow your business.

However, if things do not go as planned and they turn out to be a liability instead of an asset, you will need to let them sell back their shares or fire them. On the other hand, if you want to keep them on as an employee even after they have stopped being part-owner of your company, you can choose whether or not they should continue to work there as any other staff member would.

Selling A Share of Your Business To An Employee – Work Together While You Can!

The best part about this opportunity is that it can be beneficial for both parties involved now and in the foreseeable future. The employee gets rewarded with some extra security while learning important parts of running a business, plus they also have an interest in seeing your company succeed so they can make more money too!

You, on the other hand, get to free up some cash and prevent any unnecessary legal complications with selling a part of your business.

Speak to your accountant today about how you can take advantage of this opportunity for everyone’s long-term success!