If any of the above apply to you, or to get a free business sale assessment, contact us and we will walk you through the legal aspects of selling your business.
How To Sell A Business
Most Business Owners don’t know how to Sell a Business. Many fail to become ‘sale-ready’, resulting in missed opportunities, or a low sale price. Being exit-ready at all times means your Business is in good shape, allowing you to Sell when the time is right, and demand the best possible price.
How to Sell a Business – The 5 key questions to ask yourself before Selling a Business are:
1. Am I ready to Sell my Business? (Common Problems)
a) Business is Run Through a Trust
If you run your business through a family trust, then you may be limited to selling the assets of the business to a Buyer. Some States (e.g. Queensland) charge transfer duty on the sale of business assets (in Queensland, duty is approximately 5% of the sale price).
b) No Proof of Ownership of Intellectual Property
Does your business involve the use of important intellectual property? Intellectual property includes trade marks, patents, designs, trade secrets, technical know-how, copyrighted works (including methods, processes, training programs, software), and confidential information (e.g. customer and supplier lists).
c) Contracts Prevent Sale of Business
Contracts entered into with customers, suppliers, and other third parties, may prohibit a sale of your business, or require you to obtain the other party’s consent before selling.
2. Will Selling my Business give me a Tax Problem?
a) Excess Cash Held in the Business
If you run your business through a company, you may have been retaining excess amounts of cash in the company as retained earnings. That cash must be extracted before selling, otherwise the Buyer will have to pay you for the cash.
b) No Capital Gains Tax (CGT) Discount Available
You cannot access the 50% CGT discount if you run your business through a company and sell the business assets to a Buyer. For that reason, it is generally a far better option to sell your shares in the trading company, as you are likely to be entitled to the 50% CGT discount.
c) Sale Attracts Transfer (Stamp) Duty
As mentioned above, some States charge transfer duty on the sale of business assets. While transfer duty is usually paid by the Buyer, the duty cost (approximately 5% of the sale price in Queensland) will be factored in by the Buyer in negotiating the terms of sale.
Many tax problems can be minimised or avoided completely. Contact us now to discuss the best tax strategies for selling your business.
3. What is the best structure for my Business Sale? (Asset Sales vs. Share Sales)
The best structure for the sale of your business will depend on your legal structure, the state of your tax affairs, and the number of potential Buyers in the market, among other things.
- customers and suppliers must be notified of the sale;
- premises leases and equipment leases must be transferred;
- employees must be terminated and re-employed by the new owner;
- business licenses and permits must be transferred; and
- bank accounts and other financial arrangements must be changed.
Choosing the right structure when selling a business is important, to say the least. We are experts in structuring business sales across all industries. Reach out now to discuss your options.
4. Do I rely on key people who might leave if I Sell?
5. Are there any hidden problems which might scare away a Buyer?
Other factors include the nature of the business being sold, industry standards and norms, and the structure of the sale (Asset Sale vs. Share Sale).
The best time to contact us is before you sell, not after you list your business for sale. Reach out now to discuss strategies for ensuring a quick and painless sale.