You have decided to part ways with your business and sell it to a new owner. As you know from running your business, there are many documents involved and a lot of paperwork to complete. The same goes for when you hand over your business to someone else. Not only do you need to negotiate seller’s agreements, financing and tax requirements, but you also need to consider what information you owe the new buyer regarding your business. Below is a list of documentation you are legally obliged to hand over.
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What You Must Do
- Provide financial records. You will need to provide any appropriate records to the new owner of your business. These include profit and loss statements, balance sheets, cash deposit records, loans, financial and business plans, and any outgoing costs (such as rent and utility bills).
- Provide information regarding business operations. This will depend on the type of business you own. Typical examples are: utility accounts such as electricity and gas, insurance accounts, stock and assets inventory, and a business history.
- If your current employees are remaining with the business under the new owner, you will need to give the new owner any employee information and records. This includes information regarding leave, pay, and any other contractual obligations that you have set out. The new owner does not need to comply with your existing employee contracts, so you need to notify your employees of the transfer of business and that they will need to sign a new employee agreement.
- Transfer lease agreements. Your lease agreement will have unique conditions pertaining to transfer of ownership.
- Transfer or cancel your business name. If the buyer chooses to continue using your business name, you will need to request a transfer with ASIC and then the new owner will register with it. Your registration will be cancelled after 1 month.
- Other legal documents may include work health and safety obligations, client contracts and trading agreements, and franchise agreements.
Due Diligence
Due diligence occurs when a buyer conducts an investigation of your business before finalising the purchase and signing any contracts. This is so they can gather the risks and values associated with your business. It is likely that the buyer will uncover most of the above information and anything to do with your business operations and procedures. Furthermore, hiding documents and records could deter potential buyers from considering your business. When selling your business you should be as transparent as possible so your buyer has the confidence to make this transaction.
Conclusion
Selling your business can be a complicated and emotional process for many. There are many steps to take and things to consider. As with any business transaction, you should aim to be as informed as possible, especially regarding your legal obligations. Consider speaking to a business purchase/sale lawyer to receive comprehensive advice throughout the entire process.
Don’t know where to start? 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.
