This article is brought to you by NEW DEALIMMOBILIER, the real estate network
The sale price of a business is subject to a number of peculiarities when it comes to determining and paying for it. This article looks at these two aspects of selling a business.
- Determining the sale price of a business
The sale price of a business is supposed to represent the market value of the business. This value is always difficult to determine: it depends, of course, on the turnover of the business, but also on the physical components of the business, the operating results, the location, practices in the business sector in question, etc.
It is therefore important to consult a professional or the seller's accountant to obtain the most accurate valuation.
Once the price has been set, it will have to be divided into three parts, which will be indicated in the deed of sale. The total price must be divided into three parts, corresponding to the intangible elements of the business, the equipment and the goods.
- Payment of the purchase price of the business
In principle, the buyer pays the purchase price on the day the deed of sale is signed. Of course, it is always possible, with the seller's agreement, to arrange for payment in the future. In this case, the law provides a specific guarantee for the seller: the business vendor's lien, which is often accompanied by a lien to pledge the business.
However, when payment is made in cash on the day of signing, the seller must be aware that he will not be able to obtain his sale price immediately. There are various formalities to be completed, including deadlines for objections, higher bids and joint taxation.
So once the sale has been signed, the price will be held in escrow until a number of formalities have been completed and these deadlines have been served. Only then will the seller be able to obtain the sale price.
What are these formalities and deadlines?
After signing, the deed of sale must be registered with the tax office within one month. In practice, this period is reduced to 15 days because of the obligation to publish a notice of the sale in a legal gazette containing the registration details, precisely within 15 days of the sale.
Similarly, a notice must be published in the BODACC (Bulletin officiel des annonces civiles et commerciales) within 15 days of the sale.
From the date of publication in the BODDAC, the seller's creditors have 10 days to object to payment of the sale price. This objection enables the creditor to prohibit the receiver from paying the price to the seller until the creditor has been reimbursed.
Secondly, the opposing creditors and the creditors registered on the business (lien or pledge) have a right to make a higher bid for one-sixth of the price, enabling them to put the business back up for sale at public auction if the sale price is not enough to pay off all the creditors. This right can only be exercised for a period of 20 days after publication in the BODACC.
If the price is paid directly to the seller without waiting for the above time limits to expire, the payment will not be enforceable against the seller's creditors, who may take action against the buyer. The buyer could then be forced to pay the sale price a second time.
Secondly, within 45 days of publication in a legal gazette (as described above), the seller must declare the sale to the tax authorities. Once this declaration has been made, the seller and the purchaser of the business become jointly liable for tax for a period of 3 months. This joint and several liability concerns the payment of income tax owed by the seller on profits made during the current year (or financial year) up to the date of the sale, as well as the payment of business tax. The purchaser is also jointly and severally liable with the vendor for income tax relating to profits for the year (or financial year) prior to the sale if they have not been declared by the vendor prior to the date of the sale. This solidarity only applies up to the amount of the sale price.
If the sale price were to be remitted or distributed during this 3-month period, the purchaser could be sued by the tax authorities for payment of the seller's tax under the joint and several liability principle. For this reason, the purchase price must be held in escrow for the duration of the 3-month period.
In conclusion, the price will be sequestered until the opposition and solidarity tax periods have elapsed. It is important for the seller to know that he will not be able to obtain his price before then. On average, this takes 5 months after the sale.
New Deal Immobilier, a network of estate agents, can help you from thefree property valuation to the sale of your property.
Written by Yannick GROS - Graduate notary
NEW DEAL IMMOBILIER, real estate network of real estate agents