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Meehans Solicitors

Sale of Business

  • Make sure selling is the right decision

    Consider the real reason behind your decision to sell your business, and make sure it's the right one for you. This is a common question that potential buyers will ask, ‘Why are you selling your business?’

    If you're thinking of selling because of financial problems, we can arrange professional advice from a business adviser to make sure selling is the right decision. Selling your business may result in additional obligations to pay, such as employee entitlements or tax amounts from asset sales.

  • Be prepared to engage other professionals such as valuers and business advisors

    Business brokers are professionals who help you buy or sell businesses. They can help you understand the profitability of your business and provide market trends for your industry. They can make the process of selling your business less stressful.

  • Decide what’s for sale

    Make sure you agree on exactly what to include in the sale of your business. Establishing what exactly is for sale will help you value your business. Ask yourself:

    • Do you want to sell the business outright including all the assets?
    • Which assets don't you want to sell?
    • Do you want to sell your registered business name?
    • Are you looking to sell the business’ intellectual property (IP)?
    • Do you want to include any property the business might own?
  • Value your business

    Valuing your business is about working out how much your business is worth so you can set the right price when selling.

    There are different ways to value your business. Three of the most common valuation methods are:

    • Analysing your market – compare your business to similar businesses on the market or that have recently been sold. While this is not a formal valuation, it does provide a guide to your possible market price.
    • Calculating a business’s net worth – compare the difference between what your business owns (assets) and what your business owes (liabilities). You need to consider both tangible assets (such as machinery, buildings and land) and intangible assets (such as goodwill, brand recognition and intellectual property).
    • Using return of investment (ROI) – use your business’ net profit to work out the value of your business.
  • Find buyers for your business

    You can advertise the sale of your business to potential buyers through different methods, which include:

    • business brokers or real estate agents
    • digital and traditional media
    • your existing networks (e.g. family, friends, or employees)
    • word of mouth
    • current or former customers of your business

    The way you advertise will depend on your business type, industry and contacts.

  • Negotiate the sale

    When negotiating the sale, make sure the information you give about your business is accurate and true. If you say anything or provide information that is later found to be untrue, it may be considered misleading or deceptive behaviour.

    You need to agree with the buyer on a range of things, including:

    • sale price
    • deposit amount (usually 10% of the sale price)
    • settlement period
    • handover training (if any) for the buyer
    • arrangements for existing staff
  • We prepare the contract documents including any transfer documents with other entities

    We will ensure the contract doesn’t include any false statements, and covers all aspects of the sale, including:

    • 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, including whether employees are to be transferred with the sale
    • statements about what will happen if any issues arise (for example, the buyer decides not to proceed, mistakes are discovered in the contract, etc)

    There are some contract clauses that will restrict you from trading in your profession after the sale of your business. These clauses are often to prevent you from competing directly against your sold business.

  • Take care of your employees

    At the right time it is important to communicate with your employees and let them know whether they will be transferring across to the new owner or ending their employment due to the sale of the business. In both cases, a transfer of business ends an employee’s position with you. You must give your employees notice of ending their employment with you or provide payment in lieu of notice.

    When employees transfer with the business, you need to give all relevant employee information to the new owner. There are some employee entitlements that the new owner must recognise and others that the new owner doesn’t have to recognise.

  • Finalise your tax and legal issues

    Consider whether Capital Gains Tax (CGT) and Goods & Services Tax (GST) apply to the sale of your business. For example, if your business is registered for GST, you may need to include GST in the price of your individual business assets or repay GST credits.

    Check whether there are any requirements in your state or territory about what information you need to give potential buyers.

  • Transfer your business to the new owner
    • Once your business is sold, we will ensure the transfer your business to the new owner. Including:
    • transfer leases, licenses and permits.
    • If you're selling a small business, CGT concessions may be available.
    • If you consider carefully what tax obligations will arise from the sale of your business you can also plan to meet them and avoid being in a debt situation. If you do find that you cannot pay your taxes on time, you may be able to get help through an ATO payment plan.