If you’re thinking about transferring the ownership of your business, it is important to follow all the necessary steps. We have created a step-by-step guide to help you with transferring your business.
Change of Business Ownership
A transfer of business is the movement of a business from one owner to another. This could include selling your business to someone else or transferring it over to family. Under the Fair Work Act 2009 (Cth), a transfer of business applies when:
- An employee of the old business begins working for their new employer within 3 months
- There is a connection between the first and second employer
- The duties of the employees are similar or the same as they were for the previous owner
If the new employer does not keep any of the staff from the previous employer, there has not been a change in ownership. Therefore, for a valid transfer of business, at least one former staff member must be kept.
1. Complete final tax and payment obligations
When there is a change in business ownership, as a former owner, there are final payments and obligations that you need to fulfil. Any outstanding bills should be paid as soon as possible. Further, outstanding employee entitlements, final tax returns, unpaid business activity statements and instalment notices should be lodged and paid.
2. Understand Employee Entitlements
Contrary to what you might believe, a sole trader can employ staff within their business. Hence, when changing ownership, it is crucial to be employee entitlements, especially if you are a new employer. An employee transferring from the old employer to a new one may be covered under particular awards.
For example, if they were covered under an enterprise award or agreement, they will be covered by the same agreement prior to the transfer. On the other hand, if they were covered under an award, they may switch to the award covering their new employer.
3. Report the Change of Business
Notifying all stakeholders in your business that there will be a transfer of business is important. Government agencies such as the Australian Taxation Office (ATO), Australian Securities and Investments Commission (ASIC) and the Australian Business Registrar (ABR) require you to report any changes within 28 days.
4. Transfer Lease Agreements, Permits and Licences
In order for the new business owner to successfully run the business lease agreements, permits and licences may need to be transferred. However, keep in mind that transfers can take up to 12 months. Hence it is important to complete these transfers as early as possible to avoid any issues later on.
Further, depending on your lease, different rules apply for a transfer of business. If you are unsure which leasing requirements you must meet, speak to a leasing lawyer.
5. Handover Records and Assets
Certain records or assets kept by your business must be handed over to the new owner. These include:
- Intellectual property
- Business records (employee, financial and customer records)
- Marketing assets (domain names, passwords, usernames)
6. Cancel Registrations
Upon the transferral of a business, your ABN must be cancelled as it cannot be transferred over to the new business owner. The new business owner will have their own ABN. When cancelling your ABN, you should be aware that registrations for GST, luxury car tax and others will also be cancelled.
Meanwhile, the business name can be transferred if the new owner wishes to keep it. Once you apply for a transfer, your registration under that business name will be cancelled within 28 days. However, if the new owner does not wish to keep the business name, you can apply to cancel it.
Conclusion
Changing business ownership does not have to be a difficult task. However, if you have any further questions or would like some assistance with a transfer of business, contact a business lawyer.
