How to Sell a Business in Australia

Selling your business can be a hard choice due to various reasons. Whether it is to protect you or for better fortune, it is important to understand the steps that you need to follow while you sell your business. In this article the steps that you need to follow if you are planning to sell your business in Australia. Keeping in mind that laws vary from place to place, the article adheres to the steps suggested by the Australian government in its self to avoid any kind of confusion and to present the article as objectively as possible.

Taking the right decision
Deciding means of Sale
Analysing the Worth
Finding the Right Buyer
Getting through the sale
Writing the contract
Addressing the Employees
Finalising Issues Related to Tax and Legality
Transfering the Business
FAQ

Taking the right decision

There might be various reasons why you sell your business. Whatever the case maybe it is important that you scrutinise all the options available before finalising that you have to sell the business.

Having a clear idea will also help you engage with the buyer who will most probably ask the same question. Another reason why thinking enough before you choose to sell is that in many cases the sale can add additional financial responsibilities even when your intention was to get rid of it.

Employee entitlements or tax amounts may continue to haunt you even after the sale. So, if you are going to sell think it through.

Deciding means of Sale

There are different ways through which you can sell your business. While you can do it on your own it is highly recommended that you do it with the help of a business broker. They are professionals in the field who will help you have a better understanding of all kinds of legal documents and government requirements.

They also help you make the best out of the sale by advising you about the most profitable ways in which you can complete the transaction. However, it is extremely important to double-check the details of these professionals.

Analysing the Worth

One of the most important tasks, before you sell your business, is determining how much your business is worth. Giving the right pricing is a very determining factor. You can do this estimation either by doing a comparison with similar businesses in the market or you can look at the amount for which businesses similar to yours were sold.

This process will give you an idea about the possible market conditions. Another way is by calculating the differences that arise between assets and liabilities. It is important to consider tangible and intangible assets like buildings and brand recognition respectively. Or else you may also use the net profit of your business to finalise the value of your firm.

Finding the Right Buyer

There are multiple ways in which you can find buyers for your business. As mentioned earlier you can take the help of business brokers or agents to help you connect with a buyer who will give you the rightful price. Here too, Lloyds brokers will be an excellent guide and support to find a buyer in Australia.

You can also exploit your existing networks of friends employees or family to find out people who will be willing to buy your business. As technology gets revolutionised you can use different media to give publicity to the sale through advertisements.

You can always use the help of the customers of your business to find the right buyer. Whenever you try to convey the message of sale, make sure that you are clear about your requirements and other relevant information about which the buyer should be aware.

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Getting through the sale

The part where you negotiate with your prospective buyer is a place where you need to be extremely careful, honest and accurate. During the negotiation make sure that there is a proper agreement at least on words on things like sale price, settlement period, the handover training for the buyer if necessary, demand of advance to be paid et cetera.

Writing the contract

The preparation of your contract is normally done by an intermediary for you. However, you should be aware of the requirements and laws that you need to follow as they vary from state to state. So make sure that you go through the rules and regulations pertaining to the state or territory in which the business is situated.

You will have the help of a solicitor to crosscheck the contract for you. They will help you figure out any kind of discrepancies and will also ensure that every detail of the sale is clearly mentioned in the contract. These include assets like property, equipment, stocks et cetera and also the liabilities inclusive of creditors.

If there are any other special kinds of agreements like the ones where you are restricted from starting a business in the same field or anything of the same kind, make sure that you are aware of all these and that they are properly mentioned in the contract. Be watchful about the things that are mentioned regarding the future of the business and if they have any connection with you.

Addressing the Employees

Employees are the most important driving force of any business. Being the foundation they are the ones who are the most affected when a careless sale happens. Hence it is important that you communicate with your own employees about the things that are going to happen and inform them about the decisions taken with regard to employee positions.

You are obliged to give them prior notice or provide payment in lieu of notice. If at all the employees are getting transferred along with your business make sure that you provide all the necessary details about the employees to the new business owner.

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Finalising Issues Related to Tax and Legality

You need to seriously consider if CGT or Capital Gains Tax and GST or Goods and Services Tax apply to your business sale. The procedure you need to follow completely depends on whether you are registered for GST or CGT.

Transferring the Business

When you are transferring your business after the sale you need to make sure that you transfer all permits, licenses, and leases. Do not forget to cancel you are ABN. You can either transfer or cancel your business name as well.

Finalising things like activity statements, installment notices and tax returns are also an important part of transferring your business. Remember that until the transferring of the business to the new owner is complete you will be the one who is responsible for any kind of agreements and obligations which are a part of your business.

In Australia, it can take up to 12 months to complete the process of license transfer which means you need to plan well ahead.

FAQ

What are the three ways to value a company?

There are three main methods used to value a company is, DCF (Discounted Cash Flow analysis), comparable company analysis, and precedent transactions.

Do I have to pay tax if I sell my business?

Yes, you may have to pay capital gains tax if you sell your business.