Selling a business

With so many options, obligations and requirements, we recommend speaking to a legal professional well in advance of your plan to sell. This way a sound plan can be established that will ensure the greatest chance of a successful sale.

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Areas for consideration for selling a business

Let us preface this by saying this is a topic of far reaching proportions and one where we strongly advise sellers (and buyers) to engage a professional team from business broking and legal counsel to accounting.

While it may seem an unnecessary cost in this early stage, it may save you tens of thousands of dollars in legal and tax costs for issues and obligations you may not meet or even be aware of.

For simplicity, we will focus on Australia as a whole rather than state by state as rules, regulations and requirements vary dramatically. We encourage you to speak to us to help identify specific state requirements.

This noted, there are some key general areas for consideration and ones that will get you on the right path.

1. Is selling the right decision?

We are not offering personal advice on this, rather the general comment that if you are selling due to financial problems or because you can’t comply with government regulations, it may be worth re-thinking whether getting help or advice might help put your business back on track.

2. Should you use professionals in the sale process?

While many will opt to go it alone, we strongly recommend the use of select professionals as the sale process can be time consuming and very complicated. Consider a business broker who has a network of potential buyers. An accountant who can guide you through the mire of financial complexity. A legal consultant who can ensure you follow the letter of the law and see you don’t find yourself bankrupt or in court.

3. Valuing your business

A challenging goal indeed. It is a process that must be undertaken with objectivity, not emotion. Following objective and professional advice will ensure you determine a value that is at a fair market and saleable price. There are a wide variety of ways to value a business from assessing the value of your assets, estimating future profit and working out how much goodwill you have established. Every business is different and all must be valued on their individual merits.

4. Finding buyers

As with a sell price, there are many ways to find prospective buyers. In short you could consider:

  • Business brokers or real estate agents
  • Advertising online
  • Existing networks (e.g. family, friends, or employees)
  • Advertising in trade publications or using your industry contacts
  • Word of mouth
  • Notifying customers of your sale.

There are of course requirements for the type and style of advertising you can use for a particular business, so check with your legal counsel to ensure you are meeting your obligations.

5. Preparing contracts for sale

Your legal team should draw up the contract of sale to ensure it doesn’t include any false statements and covers all aspects of the sale including (but not limited to):

  • All the relevant assets that are being transferred, including property, equipment, fixtures, fittings, stock and any rights to use any names
  • All the relevant liabilities, including creditors (people or businesses that your business owes money to) and the lease of the business premises
  • Responsibility for employees and employee entitlements
  • Any restrictions on trading in your profession after the sale (to prevent you from competing directly against the new owner).

6. Legal and tax issues

There are many legal and tax issues to consider on both sides of the sale.

Some considerations:

  • Transferring leases, licenses and permits
  • Finalising tax returns, activity statements and instalment notices
  • Cancelling your ABN and transferring or cancelling your business name
  • Insurance requirements for your business, such as run-off cover (where you are insured for any legal claims that are made after you sell your business)
  • Capital Gains Tax (CGT) and Goods and Service Tax (GST) obligations. What are your obligations?

With so many options, obligations and requirements, we recommend speaking to a legal professional well in advance of your plan to sell. This way a sound plan can be established that will ensure the greatest chance of a successful sale.

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