Many business owners believe an external sale of a business is the only (or at least the best) exit option. Typically, this is because business owners recognize their employees or family members are unable to finance a business acquisition. So exiting owners often think they need to sell their businesses to outside buyers to meet financial goals.
However, internal business transfers also offer benefits, and exiting business owners should consider both options.
There are three primary differences between internal and external business transfers. First, the driving force behind an internal transfer is a business owner's motive to pass the business to someone internally rather than to an outside buyer. Second, in internal business transfers, business owners frequently consider tax planning and estate planning along with exit strategies because internal transfers, as a general rule, allow for more flexibility in these areas than external transfers. And third, corporate assets, including future cash flows, are leveraged differently in an internal transfer.