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The Legal Checklist for Selling Your Business
If you plan on selling your business, you'll need to consider more than what your lowest selling price might be. A lot goes into preparing a business for the market, which is why working with an experienced business broker is essential. He or she can help you set an accurate value for the business, effectively market the company to the highest number of prospective buyers, create competition amongst buyers and negotiate a sale that optimises your return.
But business brokers aren't the only people you might consult when selling a business. It's a good idea to get a legal professional involved, especially before you sign anything contractual. Here's a quick checklist of legal matters you might want to work through with a solicitor before you go to market.
- Ensure the method by which you sell the business avoids or minimises tax liability.
- Ensure that agreements, contracts and similar obligations are up-to-date. Carry out a thorough review before placing your business on the market. This helps increase the value of the business and prevents unexpected problems from coming up during sales negotiations.
- Go through the licenses and permits required by your business. Obviously expired licenses are a problem that needs to be resolved. You also need to check the assignability status of current licenses or permits.
- Check regulatory and legislative compliance matters. One of the fastest ways to unsettle buyers is to have an expensive compliance obligation hanging over the business; even buyers who are willing to purchase anyway may want a steep discount on the sale price to compensate for future expenses.
- Work with an accountant to ensure your annual accounts are finalised. You'll need this information for the appraisal, and qualified prospective buyers will expect to see at least profit and loss accounts before making a written offer .
- Work with your broker and solicitor to ensure the agreement for sale and purchase is comprehensive and protects your interests. Matters to be addressed include:
- The purchase price (including breakdown of tangible, and intangible values)
- The time period for due diligence (this is the time the buyer has to investigate the business after you have accepted a written offer but before the sale becomes unconditional.
- Other conditions (such as consent from the Landlord or Franchisor)
- Consider the restraint of trade carefully. It will address geographic location, duration and industry category. You need to be satisfied that your future plans are not compromised.
- Check the Personal Property Securities Register. If any asset or property involved in the sale is listed, you'll need to remove security by seeking appropriate discharge before the sale is finalised.
- It’s a fact that every single business owner, will at some point exit their business. Having a clearly defined and well thought out exit strategy will go a long way towards you achieving the best possible outcome.
This checklist includes some common legal matters every business owner should consider when selling. It's not comprehensive, and every transaction is unique. By working with experienced brokers and other professionals, you can protect your interests while optimising the outcome of the sale of your business.