Will Punivalu, Principal at WJM shares his insights
Many business owners find the prospect of selling their business daunting and unnecessarily stressful. As an experienced business lawyer who has dealt with selling businesses across Victoria, I’ve highlighted three important things to consider which will assist in simplifying the process.
Preparation in selling your business
Often, business owners are prompted to sell their business because of circumstances or events that arise rather than forward planning. If you are considering selling your business, ideally, you should plan 12 months ahead. This allows you time to review your financials and make changes where necessary. This time frame also allows you to undertake a review of the business entity and prepare or update any undocumented or outdated legal agreements. This can include documents such as leases, client or supplier agreements or licenses and permits.
Generally, seeking legal and accounting advice early will allow you to make informed decisions about any necessary changes to your business, which will assist in getting it ready for sale.
Contract of sale for businesses
It is important that you engage a lawyer to prepare the contract of sale, which governs the terms of the sale and the obligations of each party.
A contract of sale includes essential terms such as the price, the list of assets being sold and a date for settlement. It is likely to also include conditions such as a restraint of trade for the seller trading the same or a similar business after the sale, conditions for the transfer of employees, and assistance by the seller to the purchasers prior to or after the sale. The contract of sale will also contain conditions relating to communication with employees, transfer of employees and adjustments for employee entitlements.
The contract of sale will deal with the identification and transfer of intellectual property, which is a part of the assets of the business. The intellectual property of a business can include trademarks and logos, websites, domain names, email addresses, trade secrets, ‘know-how’, designs and copyright.
Section 52 Statement
When selling a small business for any price up to $450,000, the business owner or their accountant will need to prepare a Section 52 Statement setting out the financial performance of the business over the last 2 years and provide this to a potential buyer before the contract of sale is entered into.
Goodwill transfer to a new owner
Often the goodwill of a business will be associated with the business owner. Therefore, it is important to identify key customer contracts and relationships. Additionally, discuss any arrangements for the business owner to continue working in the business to satisfy the purchaser that any goodwill will be transferred to them after the sale of the business.
Selling a business in Geelong, Bellarine or Surf Coast region?
If you are considering selling your business contact the experienced Business Law team at Whyte Just & Moore. Providing legal advice for businesses in Geelong and along the Bellarine Peninsula and Surf Coast for over 140 years, WJM’s legal expertise will ensure the advice provided concerning the sale of your business is tailored to you and your business.