Are you considering selling your business? Our business lawyers have put together a few questions that you should find out the answer to, or discuss with your lawyer before you sign a contract of sale.
Key considerations when selling a business:
The most important decision is who are you intending to sell your business to? Have you been approached by someone, maybe a competitor? Or a key employee? Or are you planning to advertise it on the open market? If so, will you use a business broker?
The next decision to make is how are you planning on selling the business? The answer to this question will depend on the entity that actually owns the business. Is it you personally? Are you the sole owner, or is it a partnership? Or is it a company or trust? Then answer to this question will have an impact on the process and how the sale should be structured. You’ll want to try and set the sale up in a way that will limit the amount of tax you have to pay, particularly capital gains tax. There will also be stamp duty implications for the buyer.
Other considerations when selling a business:
- Will you require the purchaser to have a guarantor to guarantee their obligations under the contract?
- How is the price of the business to be split between goodwill and other assets?
- Is there stock to be sold with the business, and if so on what terms? Will there be a cap on the amount of stock the buyer has to take?
- What about your employees? Does the new buyer intend to keep them on? Do you know your legal obligations when it comes to transferring or terminating employees?
- Are there additional contracts for the business that will need to be assigned to the buyer?
- Does the buyer wish to impose a restraint of trade? This would mean you would not be able to operate a business of the same nature in a nearby area for a certain period of time.
- For GST purposes and the sale of going concern, will you be supplying everything necessary for the ongoing conduct of the business?
While this may seem like a lot of things consider, it is important that you know the answers to each in order to successfully sell the business and ensure there are no ongoing issues. Your lawyer will be able to work through the sale with you and ensure all of the possibilities are explored to maximize your return on the sale.