No, of course not.
You also do not really need a parachute when jumping out of an aeroplane. The problem, in either case, is that the outcome tends to be sub-optimal. Grim, really.
So, let’s reframe this enquiry. Legal professionals can help you get the best possible price for your business, minimise legal risks and move on to your next new thing. Getting to that point will likely take a dispassionate review of several fundamental issues. A good lawyer will have the training and temperament to do that. Consider him or her your parachute.
What are you selling (and why)?
As a going concern, your business is probably worth far more than the liquidation value of its physical assets. Your lawyer may be able to help you take this wider view. Consider the goodwill you may have established in your community. Do you have a valuable lease, a top-notch workforce or customer database, a secret sauce or other intellectual property?
Many business owners begin to position a business for sale three to five years before they actually do so. That time can be used to clean up a balance sheet, resolve legal disputes, end troublesome or outdated contractual obligations or look forward to the future with updated IT systems, for example.
When you find a buyer and the due diligence begins in earnest you should know exactly what the buyer’s legal team will find. At a minimum, the information you give about your business must be true, accurate and complete. Your lawyer should review your disclosures carefully to protect you from any future legal liability.
Finally, is the sale response to a financial emergency? If so, your attorney may be a valuable source of advice about other, less painful alternatives.
What is it worth and who wants to buy it?
There are several ways of valuing an ongoing business: one simply subtracts liabilities from the value of assets, others look at earnings value and still, others look at contemporary sales of similar businesses. There are many variations on all of these alternatives. Your attorney will work with your accountant and a professional business valuer to come up with the right price and to negotiate with your buyer to actually achieve it.
As an established business owner, your contacts may be sufficient to yield a buyer or you may need to retain a business broker to find a buyer. Either way, your attorney is an essential part of the team. Remember, you should also evaluate the financial strength of any potential buyer. Due diligence goes both ways.
The sales agreement
In NSW the seller’s solicitor usually drafts the sales agreement. This agreement should specify:
- the sale price and deposit amount;
- all the assets that are being transferred, including property, equipment, fixtures, fittings, stock, and any rights to use any names;
- all the relevant liabilities;
- the settlement period;
- handover training (if any) for the buyer;
- arrangements for existing staff;
- a method of resolving disputes should any issues arise; and
- any restrictions on trading in your profession after the sale (to prevent you from competing with the new owner).
An off-the-shelf sales agreement is unlikely to deal with all these issues in a way that will best meet your needs.
Will your employees be ending their employment or transferring with the business? Either way, communicating with them about the future is important. Since the transfer of business ends an employee’s position with the former employer, the employees must have notice of ending employment or payment in lieu of notice, even if they continue on with the new owner.
When employees transfer with the business, all relevant personal information must also be transferred to the new owner. There are some entitlements that the new owner must recognise and others that the new owner need not.
Taxes and other legal implications
In some cases, Capital Gains Tax (CGT) and Goods and Services Tax (GST) may apply to the sale of your business. Financial and legal professionals can help you anticipate the tax implications and whether you are eligible for any CGT concessions. You will also need to cancel your ABN and either transfer or cancel the business name.
Looking to the future
You likely worked hard and poured a good deal of yourself into building your business. Letting it go may not be easy. But there are ways to implement this decision that will put you in a better position to move on to the next exciting venture. Getting competent, objective legal advice is an essential first step.
If you are considering selling your business, the attorneys at Owen Hodge Lawyers would be happy to assist you. Please call us to schedule a consultation at 1800 770 780.