While building a business can be a difficult and time-consuming process, selling it off can also be equally tough. When you decide to sell your business, it can get very tempting to get done with it as soon as possible so that you can move on with the next phase of your project.
But, this is not the right approach. There are a lot of important points that you should keep in mind when you are selling off your business. You need to analyse and consider them properly and make sure everything is accurate.
Know your financial positioning
A succession plan definitely helps to identify the important essential financial aspects of your business, like:
You need to protect your assets, which can comprise property, inventory, and equipment. They need to be valued and maintained on a regular basis for insurance. The staff that is personally motivated and invested through a strong management system can also increase the value of the business. Creative pursuits, like product idea and design, can be protected through copyright, which means it is protected by the intellectual property law.
Business insurance and valuation
It is very important to have your overall business evaluated by an assessor, preferably independent, every year. This is especially helpful when you apply for a loan; the bank will look for this. You should always consider getting an insurance to cover yourself, the business, the assets, or even lost income if you are disabled temporarily or permanently. To lessen financial risks, business partners might be able to take out insurance policies on each other. Speak to your insurance broker for additional information.
Transitions can occur if one of the business partners wants to sell early, is incapacitated either temporarily or permanently, or dies unexpectedly. This agreement is a legal binding that co-owners can lay down how transitions can be made with the minimum disruption to the business. One option can be for the remaining partner to pay the portion upfront for the departed partner’s portion of the business and make timely repayments in the long run.
Know your legal position
A smart succession plan is all about anticipating future problems and trying to solve them before the inevitable happens. Spending some money and time on financial and legal checks will save you costly visits to the court in case of a spat between family members later on.
A legal agreement on how the company or business is being run can head off disputes later on if one partner decides to get out early. A shareholder agreement and a partnership agreement can include the way co-owners can safely leave. The remaining partners can buy out the leaving shareholder.
Transfer of a business name
If you are selling a registered business, you will have to officially transfer the name through the Australian Security and Investments Commission. This includes even if you are handing over the reins of the business to a relative.
Section 52 or Vendor’s Statement
When you are selling your business, you may need to give your prospective buyer a Section 52 statement (or a Vendor’s Statement) before the sale contract is signed. The statement has to include the tax and financial information about the business.
Some other supporting documents include:
- Resumes of potential successors
- Will and testaments
- Contracts which are relevant to succession
- Retirement payout agreement
- Buy-sell agreement
- Partnership agreement
- Market evaluation of the business
- Lease papers
- Insurance papers
- Goods and Services Tax registration (GST)
- Australian Company Number registration (ACN)
- Australian Business Number registration (ABN)
- Business name registration certificate
Yes, selling a business can be exciting. But, you should make sure all your legal works are done in the most systematic manner. If you are having any problem dealing with such matters, reach out to us today and give us a call!