Convert an Existing Business

Converting an existing business is probably the best way to start a cooperative.  One challenge is to get the process started.  Most sellers are reluctant to let anyone, competitors, employees or vendors know that the business is for sale. This book might help

An Owner’s Guide to Business Succession Planning.

Once you have gotten past that, there are few disadvantages.  One great advantage for the seller is that he may be able to defer taxes on the sale by way of an IRS Section 1042 exchange.  With all or most workers as new owners, you expand your ability to raise funds for the purchase.  The seller’s expertise may be available if he stays on as a worker owner.

Getting it done presents some serious challenges and could be very time consuming.  Depending on the size of the company, getting everyone informed and on board could be a huge task and having access to communication expertise is absolutely essential.  The better you can do this, the better your chances of success.

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