When a business owner in North Carolina is ready to retire, sell, or wind down their business, they will need to choose the appropriate structure for the exit. There are a few common structures used for business exits in North Carolina. We will discuss them in this article.
Each option has its own set of benefits and drawbacks, so it’s important to understand them all before making a decision. In any case, if you’re considering an exit strategy, it’s important to work with an experienced Raleigh business lawyer to set up the option you believe is best for you and your company and get you started.
Types of Business Exits in North Carolina
There are a number of different structures for business exits in North Carolina. They are listed and briefly discussed below.
1. Sale of the Company
The sale of a company as a business exit strategy is the process by which a company sells all or part of its operations and assets to another company. This means that they will find a buyer who is interested in purchasing the company’s assets and operations as a whole or in part. This can be a good option for the owners, as it can allow them to receive some money for their business and avoid having to close it down completely.
In most cases, the company will hire an attorney and a banker to help them find a buyer and negotiate the sale.
2. Management Buyout
A management buyout (MBO) is a type of business exit strategy in which the current managers of a company purchase the company from its previous owner(s). This can be done with or without the help of outside investors.
MBOs are often used when the previous owner(s) wants to retire, when there needs to be a change in ownership, or when the company is facing financial difficulty.
3. Employee Stock Ownership Plans (ESOPs); Earnouts Based on Performance
ESOPs are employee-owned businesses in which employees are given company stock in order to give them a financial stake in the company. This can help to incentivize employees and make them feel more invested in the company’s success. An earnout is a payment made to an employee based on their individual performance.
It can also be used as a business exit strategy, allowing the owner to compensate the most hardworking staff for handling company affairs when they are gone.
4. Going Public
When a company decides to go public, it is selling ownership stakes in the form of shares of stock to the investing public. This process allows a company to raise money by giving potential investors the chance to buy a piece of the company. The company will also be listed on a stock exchange, which will provide liquidity (the ability to sell shares when needed) and transparency (the ability to track the stock price and performance).
In some cases, the company’s head will decide not to hold on to any shares of the company, and may thus make their exit in this way. In other cases, they may hold on to very few shares, which gives them very little control over any of the company’s activities.
5. Private Equity Buyouts
A private equity buyout is the acquisition of a company by a private equity firm. Private equity firms are firms that invest in companies that are not publicly traded on a stock exchange.
Private equity buyouts as a business exit strategy can involve a number of different steps in order to be successful. The first step is finding a private equity firm that is interested in buying the company. Once a private equity firm is found, the company will need to provide detailed financial information so that the private equity firm can perform due diligence on the company. If the private equity firm is interested in the company, they will make an offer to buy it.
7. Mergers & Acquisitions
A business founder can acquire an opportunity to exit from the business through mergers and acquisitions. The business can be acquired by another company that is interested in expanding its market share or that is looking for new products or services to offer its customers.
The acquisition can also provide the previous business owner with the opportunity to receive financial compensation for its ownership stake in the company. This compensation can come in the form of cash, stock, or other assets.
The dissolution of a business can be used as an exit strategy for the owners or shareholders of the company. This process involves the legal termination of the business and the sale or distribution of its assets.
The goal of this strategy is to provide a way for the owners to liquidate their interests in the company and receive cash or other assets in return. Dissolution is often used to terminate a business that is no longer viable or has run into financial troubles but may also be used simply as a business exit strategy.
Our Raleigh Business Law Firm Can Help
If you’re ready to take the next step in your life and are considering exiting your business, there’s a lot to consider. The experienced team at Wilson Ratledge has helped many business owners just like you find the best option to maximize the time and financial investments you’ve put in your company over the years. Contact us today to schedule a consultation and explore your options.