Are you a business owner looking to sell your business? Have you spent years building up your business and want to work out the best way to exit the business? Or are you an accountant or financial adviser with clients looking to sell their business?
Deciding to sell a business is one of the biggest decisions faced by a business owner. There are many questions that need to be asked to ensure the sale goes according to your expectations. Below are some key questions you should ask.
- What is due diligence? Due diligence is the process of evaluating a business in preparation for a sale. Due diligence is important to ensure you are selling the business at an appropriate sale price and that any issues are addressed before you sell.
- Sell the business or sell the shares? There are different ways to sell your business and it is important to choose the sale structure that is right for you – for example, you will need to decide whether you want to sell the business and the assets OR sell the shares in your company. All options should be explored by the parties upfront.
- What are the tax consequences?
- You should consider the tax consequences of the sale, for example: Will you be eligible for small business CGT concessions and discounts?
- You should consider whether there will be a supply of a going concern (in which case GST is not payable).
- Apportionment of the purchase price will impact the capital gains tax payable due to the depreciation schedules of the business assets.
- Is there a lease that requires landlord's consent to assign the lease? If there is a lease, you may need to contact the landlord to obtain consent to assign the lease to the purchaser.
- Are there warranties you need to provide? The purchaser usually requires the vendor to provide a broad range of warranties in respect of various aspects of the business. As a vendor, it is important you review these warranties carefully with your lawyers and accounting/financial advisers to ensure that they are accurate, otherwise the purchaser may have a claim against you for breach of warranty.
- Can you open a competing business after you sell the business? The purchaser will often require the vendor not to engage in certain activities which would compete with the business just sold to the purchaser for a period of time after the sale. It is important that you consider the scope of any restraint of trade in the sale contract.
The sale of a business can be complicated and it is important to get it right.