Company sold: Software entrepreneurs may have special legal and financial needs when investing assets

A successful sale usually releases considerable financial resources and the way in which the assets are invested can have a significant impact on the future personal and financial future.

Why is this topic relevant to me as a software entrepreneur?

For entrepreneurs in the software industry, the topic of investing assets after a sale is crucial.

A successful sale typically frees up significant financial resources, and the manner in which assets are invested can have a significant impact on their personal and financial future.

This article addresses the special characteristics that the software entrepreneurs we advise often bring with them and the opportunities and needs that typically arise from their individual circumstances when it comes to investing assets.

The information contained in this article is for informational purposes only and does not constitute investment advice. The information provided is intended solely to convey general knowledge about investing assets for entrepreneurs after a company sale.

What do I need to know about this?

Entrepreneurs should consider their options and preferences regarding the investment of their future assets early on in the sales process.

Their own life situation and future goals should be considered in detail. These could include the following aspects:

  • Availability/Liquidity: What portion of my assets is freely available, and what portion is tied up in illiquid assets or closed-end funds?
  • Asset Transfer: Is the transfer of my assets to potential successors properly regulated?
  • Life Planning: Do I want to play an active role in new companies or as a direct investor, or have my assets managed by third parties?

In most cases, entrepreneurs do not have a financial advisor until the time of the sale. Here, too, entrepreneurs should decide early on whether and with which advisors they want to work after a sale – in most cases, the bank they previously consulted is no longer the right contact.

If the sale results in a significant increase in assets, working with a professional asset manager or family office is therefore strongly recommended. In addition to asset allocation and return optimization, legal and tax issues arise when the sale price is determined, and they can provide support.

At Loy & Co, we have contacts with relevant providers and can establish contact if necessary.

How can I use this information for myself?

In summary, businesses can face significant financial consequences from the bogus self-employment of freelancers. If this is only discovered during due diligence, it will at least have a negative impact on the purchase price.

In preparation for a sales process and the associated due diligence review, businesses that regularly or continuously involve independent software developers or other service providers should be able to eliminate potential risks related to bogus self-employment in advance or reliably quantify any related back payments.

Businesses can conduct an audit of individual employment relationships as part of a so-called inquiry procedure or status determination procedure with the German Pension Insurance Association. The involvement of a specialist lawyer is recommended even at this stage, as the questionnaire already partially requests legal assessments of the employment relationship. It should be noted that the classification always applies only to a single contractual relationship.

Finally, when structuring future employment relationships with service providers, entrepreneurs should ensure that essential aspects of self-employment are met.

More articles