There may come a time in your business ownership journey when it’s time to cash in on all of your hard work and effort in building your business and pass the reins to the next owner. If you are considering selling your business, there are a few housekeeping tasks that you can undertake now, to help attract the best price for your business.
If you lease your premises, review your lease to determine the remaining lease term and whether there are any renewal options. Particularly where your premises are key to your business operation, a buyer might be hesitant to buy your business if there is a chance that they may need to relocate the business in the near future. If the remaining lease term is short and there are no options to renew, consider approaching your landlord to negotiate an extension prior to listing your business for sale.
If you lease retail premises, seek legal advice on the assignment of the lease before asking for your landlord’s consent to assign your lease to the buyer. Compliance with the processes set out in the Retail Shop Leases Act may mean that the landlord is required to release you from your obligations under the lease after the sale of your business.
2. Who owns the assets?
Compile a list of all your business assets to ensure that they are owned by the one selling entity. The going concern exemption is only available if a single selling entity supplies all the things that are necessary for the ongoing conduct of the enterprise after settlement. We often see businesses where the various business assets (lease, business name, contracts, licences and so on) are held in different entities.
If the business assets are not all held by the same entity, the buyer may have to pay GST in addition to the purchase price (and transfer duty on the GST-inclusive price) and that may affect the amount that the buyer is willing to pay for the business.
Business owners often don’t realise that many of the standard form contracts they sign as part of their business activities allow the other party to register a security interest against them on the Personal Property Securities Register. Many of those registrations are not removed as a matter of course once the contractual relationship has come to an end. We recommend obtaining a PPSR search of the selling entity before listing your business for sale, and writing to any third party with a registered security interest that is now out of date, to request its removal. PPSR registrations that are not removed could hold up a settlement or allow the buyer to terminate the sale contract.
4. Plant and equipment
The standard REIQ Business Sale Contract contains a warranty from the seller that the plant and equipment are in good working order and condition at settlement. We recommend checking over the plant and equipment and putting it into the best condition possible prior to listing your business for sale. This is also a good time to compile a detailed list of the plant and equipment being sold and to consider whether there are any items that should be specifically excluded from sale.
5. Financial information and business records
Any buyer will want to see financial and business records that are organised, consistent and well-kept. Many buyers will also want the seller to warrant the accuracy of the financial information provided about the business. It’s worth spending some time before listing your business for sale making sure that you have all of the usual financial information for the last few years and making sure that your business records are in order, including copies of contracts, any licences that are necessary for the conduct of the business, employee records and so on.
6. Intellectual property
Last but definitely not least, intellectual property. If you carry on a business in a name other than your own legal name, you are obliged to register your business name with ASIC. Ensure that it is registered and current, so it can be transferred to the buyer.
Also, consider whether it might be beneficial to register a trade mark that can be transferred to the buyer at settlement. A registered business name does not give you ownership of that name, but a trade mark will. That ownership allows you to stop a third party from using it and protects your brand. Buyers will have confidence in their ability to operate the business under its current name and branding if there is a registered trade mark in place prior to settlement.
Contact our Commercial + Property Team for more helpful information if you are considering selling your business.
For further information please contact Amanda Tolson, Director.