Selling your business is a big decision with important financial consequences. The contract for the sale of your business should be the end product of careful structuring and negotiation, not the scrambled product of a process that begins with an online form. Business people may be tempted by the lure of legal do-it-yourself kits, but these can expose you to unnecessary risk associated with price, taxes, obligations to your employees and restrictions on your future endeavors. For expert planning and business legal advice about the sale of your business contact Owen Hodge Lawyers at 1800 770 780 or send us a message at https://www.owenhodge.com.au/contact/ to schedule a consultation.
 

Price Risks

 
Business structure. Even if you look forward to running your business from the moment you open your eyes to the moment you fall asleep, you should still plan for the day when you either want to sell it or give it to someone else. Some business structures are simply easier to value and transfer than others. Begin to work with your business lawyer long before you decide to sell in order to weigh the benefits and burdens of various different business structures. This decision should include taxation and personal liability as well as succession planning or eventual sale.
 
Inclusive price. The price that you ask should include not only the value of the tangible assets – tables, chairs, pizza boxes and other inventory, but also the value of intangible assets such as goodwill and business reputation. What about liquor or gambling licenses? What about intellectual property? Will you be transferring trademarks? Does your business have a significant online presence, and if so, will the sale include IP addresses? If you have been dealing with the daily details of being successful, you may benefit from the wider perspective of legal and financial professionals who can help you make sure to include everything of value in the valuation.
 
Continuing liabilities. This is something that every seller of a business wants to do without. Let us suppose that when your business was in its infancy, you financed it with personal credit. Perhaps you subsequently established separate business credit, but are still paying off the last bit of personal obligation. What about the lease on your current location? Is it transferable to the buyer? Are there any other debts you have incurred in the operation of your business which may not transfer when you sell the assets? Lawyers and accountants can be a nuisance, but this is something they are unusually good at. If these obligations are not transferable, set the price high enough so that you can pay them off and really walk away. Another option some sellers use in this situation is to sell the stock of the corporation (if your business is incorporated, see previous bullet point) rather than selling its assets.
 

Tax Risk

 
After the settlement has occurred, you must still:
 
cancel your ABN and other registrations
file and pay any outstanding activity statements and instalment notices
make GST adjustments on your final activity statement and
lodge final tax returns.
 
You should also check whether your state or territory government has any special requirements. Keep in mind that with proper legal advice about your transaction, you may be able to minimize, eliminate or defer GST payments. Some sellers may want to consider managing tax liabilities by structuring the transaction using put and call options.
 
Speak to one of our expert Sydney tax lawyers for more information and advice.
 

Employee Risk

 
Even if the new owner of the business intends to keep existing employees, you will need to go through the formal step of terminating them in order to define and discharge your obligations. This will include legally required notice or payment in lieu of notice, payments for unused days off and perhaps unused sick days.
 
You will also need to ensure that the fringe benefits tax (FBT), pay as you go tax (PAYG) and required superannuation payments are made. Expert legal advice from a firm that specializes in business representation like Owen Hodge Lawyers can help insure that none of these obligations are overlooked. The contract for the sale of your business can be invaluable in making sure that the sale price adequately recognizes these costs of cashing out.
 

Risks to Your New Endeavor

 
Let us think about this from the perspective of your buyer. Sue bought “Sam’s Shoe Store” and paid a good price because Sam had a great reputation in the community. Sue would clearly prefer that Sam not open up a new shoe store, “Sam’s Redux” a block away. That could ruin the value of Sue’s investment.
 
When you sell your business as a going concern, your buyer will typically insist on a non-compete agreement. These restrictions must, however, be reasonable in both in time and geography. You may be completely content with life on the beach, you may be happy with the beach for the first four weeks and then discover that you are bored, or you may have always planned to start a new enterprise. In any event, your lawyer should carefully review the limits of the agreement to ensure that it is no more restrictive than necessary.
 
If and when you decide to sell your business, you can do a great deal to ensure that you receive the best price at the least risk by engaging a firm of lawyers who will help you plan the structure of the transaction and draft a contract of sale that reflects that structure . Schedule a consultation with Owen Hodge Lawyers today, and let us show you what we can do for you. Call us today on 1800 770 780.

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