If you are considering selling your business it is important to seek legal advice to ensure that you are protected from both a financial and legal front.
Key considerations you should get legal advice on before entering negotiations with any party include how to sell, what to sell as well as what can and cannot be sold. This article will cover 4 key considerations prior to selling a business.
1. What is being sold or transferred when selling your business?
When selling your business it is important to consider how the purchase price should be apportioned. If the sale includes the transfer of both equipment and goodwill, the sale price will need to be apportioned between both. It is important to note that there are tax implications in connection with this and, therefore, it is advised to seek advice from an accountant before settling on the apportionment.
2. Transfer of leases and licences
If the sale of your business includes the transfer of any leases, licenses or permits it is crucial that you share all available information with them as there are potential consequences if this is not properly managed.
3. Continued Employment of Employees
When selling a business, its current employees may either transfer with the business to the new owners or, alternatively, their contract will end with the sale of the business.
a). If employees transfer with the business
If employee contracts are renewed so that they stay on with the business post the sale, you will be responsible for providing your employees with notice of ending employment and advise them that they will be required to sign a contract with the new owner, effective from the date of the new ownership.
b). If employees do not transfer with the business
If the employee contracts are not renewed with the sale of a business, as the business owner, you are expected to provide your employees with as much notice as possible so that they can find new employment.
4. Taxes to consider
When selling a business it is important to be aware of all associated tax obligations that might be required, in particular Capital Gains Tax (CGT) and the Goods and Services Tax (GST).