Change of ownership
A company’s change of ownership is one of the most critical stages in a company’s lifespan. Properly carried out , it gives the company a boost , but carelessly prepared, it may damage the company’s health unnecessarily.
Each company and entrepreneur have their own background, as such it's not possible to give general instructions that would help each individual entrepreneur exactly the way they would wish.
Acquiring knowledge about ownership change is a long process, which one has to grasp resolutely and for a long period of time. Carefully getting familiar with the topic should be considered, because the benefits include reduced stress, saving money and the possibility for entrepreneur’s labor to continue.
The essential rule is that ownership-change is divided into four stages: awakening, preparation, execution and take-over. The change of ownership is often done wrong in the 3rd stage and the discussion is mainly focused on handling tax- and other technical affairs. However, in reality, the third step is clearly the shortest and as a matter of fact the easiest of all four stages: on average, in the moment when the entrepreneur notices himself thinking about retiring for the first time, 5-10 years have passed by before a successor has been found, the change has taken place and a new owner has been familiarized with the company.
In the following articles you will find basic information of familiar, upcoming topics related to change of ownership (Click on the headlines to pass on to the article’s topic page - only in Finnish)
Often you will hear about “fixed for sale” actions done to used cars, which means that the worsening rust and other damages are being hidden before the car gets sold to a unsuspecting person. In other words it is at least a questionable activity, in which your own mistakes and neglections are left to be paid by an external party.
The way how ownership changes are treated in taxation is usually seen as a key reason why pulling changes through is difficult. The thought that the fruits of your labor are ruthlessly falling into the taxman’s lap can easily raise the anger up to the surface. Luckily the feeling is very wrong – as long as the change is carried out by Finnish legislation.
Tax planning is rising in importance when it comes to change of ownership, which enables to ensure that the company’s activities are viable also in the future. At best, the tax-expenses can be reduced close to zero, which would reduce the cost load for the successor considerably.
Entrepreneurs are often very interested in their company’s worth: How much money would the company bring, if it were to be sold now. This question also interests the entrepreneurs and their families planning a generational change, as the taxman determines a possible Gift-Tax, to which price the company was handed over in relation to its “true value”.
A company’s form is often determined at a company’s foundation, and its importance doesn’t get enough attention as the company’s activities evolve over the years. However, the company’s form has an important impact on the company’s tax treatment, and this importance is emphasized in a change of ownership situation.
For the entrepreneur the company is like its own child, if not even more. Because of this reason it is understandable, that the company’s owner-change affairs are often aimed to be held as the ultimate secrets for as long as possible: after all, entrepreneurship renunciation is sort of your own verification that in the economic terms, the entrepreneur’s labor has been largely done. At the same time it is being feared, that the company ownership being passed to second hands, expelling both customers and contract-partners alike, could cause difficulties for the successor’s labor right from the start.