Selling your business can be stressful, but it’s also the chance to move onto new ventures. This process involves considering what you want the future of the business to look like, what assets you want to sell, and the taxes you may be liable for. Regardless of how you choose to sell your business, make sure you follow these 3 steps when searching for the right purchaser.
1. The future of your business and employees
Selling your business inevitably means that any current employees you have will be affected. Further, you will have to decide whether you want to maintain a connection to your business or completely sever ties. Once you have decided to sell your business, it’s important to let your employees know that a change in ownership will be taking place. If the new owner plans on retaining the employees, this notice will help maintain the status quo and current culture.
Conversely, not informing your employees of a change in ownership can lead to disenfranchised staff. If the employees are being retained for their skills and knowledge of the business, it’s important that you also undertake a proper handover of your business to the new owner.
If you want to maintain an interest in your business, there are also arrangements where you can maintain an interest in your business. For example, an earnout arrangement means that you can receive additional income based on the performance of the business after you have sold it. If you want to ensure that your business is carried on according to your wishes, a buy or sell agreement will protect your interests.
2. Purchaser and seller taxes
Over time businesses gather assets such as cars, machinery and office equipment. When you transfer or sell a business it’s important to remember that you may have to pay GST on upon the sale of these assets.
The other tax to consider is Capital Gains Tax (CGT). If the business was classified as a small business you may be able to apply for CTG exemptions. There are also exemptions if the business is being sold upon retirement, or if a CGT asset has been held for 15 years or more.
Furthermore, there are specific tax issues such as superannuation and PAYG Withholding that may arise upon the sale of your business. This also includes retained earnings and if they need to be paid out as dividends to shareholders before the sale.
You also need to take debts into account depending on whether the business still has any. This will not only relate to transferring debt but will also likely impact the marketability of your business when you sell.
3. Hosting and selling
Being prepared and on top of everything is very attractive for buyers. You may find that a potential buyer approaches you and asks for employee contracts, financial records and sales records. Therefore, you need to be ready. The more organised you are, the more likely it is that you will secure a deal.
When you are hosting and advertising your business, transparency is always encouraged. Highlight the things that would be important to a buyer. This includes records such as turnover, the state of equipment and even potential competition. Ultimately, it’s about the purchaser as they are the one handing over money. A business sale lawyer can help you ensure that you provide all the required information to any potential purchasers of your business.
Conclusion
When selling your business, it’s important to be realistic, organised and ready. Set the value of your business at a realistic price and you will find a buyer. Have an organised collection of financial and sale records and you can speed up the sale process. Finally, be ready to deal with issues around culture, your business’s legacy, the future of current employees, and taxes.
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