3 things to consider when selling your business
There are a number of factors to consider when selling your business, one of the most important being how much you would like to sell your business for. Selling your business can be a challenging task, so it’s important to get it right. Aside from the sale price, there are three steps we consider imperative when considering selling your business – your employees, your lease agreement and other tax and legal matters.
When you sell your business, your employees may either:
- Transfer with the business to the new owner; or
- End employment with the business.
Transferring Employees with the Business
If your employees are to be transferred with the business, you’ll need to:
- Provide up to date employee records to the new owner;
- Notify the new owner of any contractual, leave, financial and legal obligations you have with your employees;
- Work out with the new owner what obligations you’ll be responsible for and what obligations will be transferred to the new owner and therefore become their responsibility;
- Provide your employees with notice of ending employment and outline what they’ll need to do. For example, they’ll need to sign a new employment contract with their new employer, which will be effective from the date of new ownership starts.
There are also some employee entitlements that the new owner must recognise and others that the new owner does not have to recognise. To find out more about what is required and what your responsibilities are, please refer to the Fair Work Ombudsman website: https://www.fairwork.gov.au/employee-entitlements
If you are selling your business and the new owner does not require your current employees then good communication is key for both yourself and the employees that are being let go.
You are required by law to give them official notice in writing and you will also need to pay out any entitlements they have under your employment. The notice period will vary depending on how long each employee has been working for you, and the type of employee they are (e.g. not notice period is required for casual employees).
You can also choose to pay out the notice period, which must be equal to the full amount the employee would have been paid if they had worked until the end of the notice period. For further information regarding notice periods and final pay please refer to the Fair Work Ombudsman website: https://www.fairwork.gov.au/ending-employment/notice-and-final-pay
- Lease Agreements
If your business has a lease, you will need to transfer your lease agreement when your business sells. Depending on the conditions of your lease, you may still need to pay rent and other costs or outlays up until the assignment of the lease.
Keep in mind that certain risks and conditions may apply to a transfer, depending on the lease agreement. If you’re unsure of the conditions in your lease agreement/s, these can be reviewed by a lawyer who can provide you with detailed advice.
- Tax and Legal Matters
When selling your business, there are a number of tax and legal matters you may need to know about and subsequently action. Aside from finalising employee payments, other tasks can include:
- Notifying the Australian Tax Office (ATO) of the sale;
- Cancelling your Australian Business Number (ABN) via the Australian Business Register within 28 days of your business closing;
- Cancelling other tax registrations such as Goods & Services Tax (GST);
- Making GST adjustments on your final activity statements;
- Lodging final tax returns; and
- Looking at any insurance requirements for your business.
You may also need to consider whether Capital Gains Tax (CGT) and GST applies to the sale of your business.
Once your business is sold, you will need to finalise the transfer of the business to the new owner. This includes:
- Transferring all leases, licences and permits;
- Finalising tax returns, activity statements and instalment notices; and
- Cancelling your ABN and transferring or cancelling your business name.
Please contact the Commercial and Property Law team at Carroll Fairon Solicitors if you require any further information regarding the selling or closing of your business or if you require any assistance with the sale of your business.