Anyone who is contemplating selling a business, needs to factor in a number of things. It is also best to seek legal and financial advice from a commercial or property lawyer. Below is a list of the most important things to consider when you want to sell your business.
- What makes up your business? Are there any assets that would be sold individually? This basically amounts to figuring out what you are selling, as part of the business.
- Is there GST to worry about, as with an ongoing concern?
- Are you currently operating the business on a leased property? If you are, will the landlord let you transfer the lease to the buyer?
- What other information are you going to give to prospective buyers? This might include records of accounting, or statements used to encourage people to buy the business. How accurate will they be? Be careful that you do not include inaccurate or fraudulent information while trying to sell the business.
- What will be the implications of selling the business? This includes things like capital gains tax, GST, value of any stock that is still left over, and rollover relief.
- Are all of the financial records well organised and up-to-date?
- Will it be possible for a buyer to keep the business running while it changes hands? They might need to hire new staff, or find new clients to deal with, for example.
- What is the business’ competition like at the time of selling, and how is the marketplace?
- If you have any employees, it is important their positions. Do you intend for them to remain with the business, once the new employer takes over? Are they going to keep their entitlements? Will some of the employees stay with the business, while others are let go once the sale takes place?
- What will happen to suppliers? Will their contracts be kept by the new owner, or terminated?
It is understandable for anyone selling a business to want everything finalised as quickly as possible. But selling a business is one of the largest financial transactions that most people will take part in. Rushing into things can result in problems. It is best to seek advice from a lawyer and accountant. Make sure that the conditions and terms of the sale are thoroughly documented, before any money changes hands; see this doc Business regulation and Australia’s future.
Restraint of Trade Clauses
These are important to be aware of. Including a Restraint of Trade Clause in an agreement will legally prevent the buyer from being able to compete in the industry of the seller. This applies to a predetermined location, and over a specified amount of time. While such clauses must be agreed to in the same way as any other condition of sale, they may be overturned by the courts.
There have been a number of occasions when Restraint of Trade clauses were brought into court. It is undesirable for them to make a ruling that upholds such conditions, because they basically stop the buyer from being able to draw an income from their new business. If the clause covers a particularly large area, or goes for a long period of time, it might be easier to have struck out. Consider this when thinking about including one as part of your sale.