date | theme

23. November 2022 | GmbH sale: agree on variable purchase price

24. November 2022 | Sub-annual division of profits at the GmbH sale (this contribution)

When selling a GmbH, in addition to the aspect of which selling price you as a seller agree with the buyer, there is also another financial question to clarify. Because in an under-year sale of the GmbH, it has already generated profits up to the time of the share transfer to the buyer. But to whom should they belong, the seller or the buyer? One thing is clear: up to this point in time, one has not normally prepared a balance sheet to determine the annual profit. But only through a balance sheet can you determine the profit earned by the seller at the reference date of the sale. So you make an under-year division of the profit in the GmbH sale by creating an interim balance sheet. On this basis, an early distribution of profits to the seller takes place.

The sale of a GmbH presents many challenges. On the one hand, it is important for both sellers and buyers to negotiate a reasonable price. Surely many would consider this to be the most important aspect in sales negotiations.

Financially subordinate, but also significant, is the question of whether the profit that arises in the company until the GmbH sale is more due to the seller or the buyer. Since the seller bears the responsibility for the fortunes of the GmbH until the time of its sale, it is quite legitimate to allocate to him the share of the profit that has started until then. However, the profit determination usually takes place only after the GmbH sale by the buyer. Purely legally, he alone then decides on the use of profit. How do you clarify this?

In practice, there are several options with which you can solve the question of the distribution of profits. On the one hand, you can set a variable selling price, which in addition to the fixed purchase price is based on the current profit of the GmbH. On the other hand, an agreement is also conceivable in which the buyer assigns at least part of the profit to the seller. A third option is the under-year division of the profit in the GmbH sale. We want to shed some light on this approach in this contribution.

In general, let’s consider the situation from which a GmbH sale takes place. Usually, a certain time of at least several weeks, rather months, passes during the sales negotiations. An agreement is also reached on the exact time of the corporate transaction. Often you choose the end of the year or the end of the financial year, if this deviates from the calendar year. In practice, however, an under-year GmbH sale is also quite common. And it is precisely for this general case that we are particularly interested this time. This is because the impact of the choice of the date of sale on the allocation of the current profit can be explained excellently.

In order to allocate the share of the current profit of the GmbH to both parties, we must determine the time of the company transfer. As an example, we would like to use 31.09.2022. On this day, our fictional wife Friede Fleiß sells her Fleiß-und-mehr-GmbH to Herr Heribert Herbst. Of course, both know that the GmbH is operational up to this time and generates profits diligently. The question is, how much? Because on the basis of the answer to this question, the two want to divide the current profit among themselves.

Ms. Fleiß and Mr. Herbst commission an independent tax consultant to prepare an interim balance sheet based on September 31, 2022. This is far-sighted, because in this way Mrs. Fleiß can not influence the earnings of her GmbH during the year through her own tax consultant. After all, this could make approaches and valuations that could make the profit higher than usually desired. In the opposite case, Mr Herbst, by hiring his tax consultant again, cannot use accounting voting rights in order to minimise the under-year profit to which Mrs Fleiß is entitled. The ideal here is that a neutral tax consultant determines the under-year profit according to the approaches and valuations already established in the past.

Mr. Herbst will of course carry out the actual accounting according to the legal requirements at the beginning of 2023.

Let us therefore assume that the internal interim balance sheet records a current profit of EUR 140,000 as of 31 September 2022. This much has earned the GmbH until this date under the direction of Mrs. Fleiß. So you should also be entitled to this profit. And she will receive it as soon as possible on the basis of the company purchase agreement concluded between her and Mr. Herbst.

As you could see in our example, there are quite reasonable solutions for dividing the profit in the GmbH sale between seller and buyer. However, there are also some other factors to consider here. Thus, the amount actually paid to the seller should also take into account the capital gains tax that the seller would have to pay in the event of a profit distribution. A payout of the gross profit is therefore of little use. However, the profit is also subject to taxation by the seller. In order to avoid double taxation of the profit share of the seller, you should first sit down with a specialized tax consultant.