Dominic is the CEO of Lawpath, dedicating his days to making legal easier, faster and more accessible to businesses. Dominic is a recognised thought-leader in Australian legal disruption, and was recognised as a winner of the Australian Legal Innovation Index and recently a winner of the LexisNexis 40 Under 40 (APAC).
💡Key Insight
- When selling a small business, it is essential to be clear on exactly what you are selling by identifying all tangible and intangible assets so that both buyer and seller understand the business components included in the transaction.
- Considering the future of your employees and any restraints such as geographic or non-compete issues can protect workforce continuity or help you plan where key staff will fit after the sale.
- Staying on to train new owners and transfer trade knowledge can add value to the sale and facilitate a smoother transition, particularly when specialised skills or processes are involved.
- Securing professional assistance from accountants and lawyers ensures financials, tax implications, sale contracts, and asset transfers are accurately structured and compliant with legal requirements.
There are many factors other than price that you should consider prior to selling a small business. Here are four legal tips to consider before you place your business on the market.
1. Be clear on what you are actually selling
The term “business” is very broad so when you decide to sell your business, be specific about what you wish to sell as the goodwill or value of your business may be spread through various assets of your business. You should also ensure that you own or have rights to sell that asset.
Business assets can be tangible or intangible. Tangible assets include land, plant, and equipment. Intangible assets are intangible, such as your business name, telephone numbers and your customer lists.
Make a list on what components of your business you wish to sell or more importantly, wish to retain.
2. Consider the future of your employees and other restraints
Many employers do not tell their employees that they are putting the business on the market. However, you should consider whether you want to ensure that the employees remain employed with the new owner or give them adequate notice. Conversely, if you are looking to open a new business elsewhere and wish to take key employees with you, this should be incorporated into your sale and you should be aware of any geographical restraints on competing with the business.
3. Training the newcomers and passing on trade secrets
Are you looking for a quick sale or are you happy to stay temporarily to train the new owners of your business? Staying on and training the new owners can add value to your sale and also ensure that the brand name you created is passed onto able hands. If there are any special recipes, formulas or methods you are passing on with the business, you do not want to disclose these until after the sale which makes the training period a suitable time to pass on your skills and knowledge.
4. Get professional assistance
Accountants can help ensure that your financial figures clearly reflect the financial performance and position of your business. Your financial reports are going to be an important indicator of how well your business operates. There will also be various GST, tax and stamp duty considerations which your accountant can advise you on.
Lawyers can help protect you and include, exclude or negotiate important terms in your sale of business contract. They will also be able to tell you what you can or can’t sell and how those assets are to be transferred to the purchaser. Throughout the course of your business, you will have entered into various long-term agreements that will need to be assigned or terminated. This ensures that your legal rights and obligations tied to the business are completely discharged after the sale.
Need more help? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.
