Sell your business

Consider the real reason behind your decision to sell your business, and make sure it's the right one for you. This is a common question that potential buyers will ask, ‘Why are you selling your business?’.

If you're thinking of selling because of financial problems, consider about getting professional advice from a business adviser to make sure selling is the right decision. Selling your business may result in additional obligations to pay, such as employee entitlements or tax amounts from asset sales.

Look at using a reputable business broker, accountant or solicitor to help you sell your business.

Business brokers are professionals who help you buy or sell businesses. They can help you understand legal and government requirements, offer advice about the profitability of your business and provide market trends for your industry. They can make the process of selling your business less stressful.

Make sure you check the professional's credentials to ensure they're reputable before using their services.

You may also wish to talk to family members and friends for more personal advice on your decision.

Make sure you agree on exactly what to include in the sale of your business. Establishing what exactly is for sale will help you value your business. Ask yourself:

• Do you want to sell the business outright including all the assets?
• Which assets don't you want to sell?
• Do you want to sell your registered business name?
• Are you looking to sell the business’ intellectual property (IP)?
• Do you want to include any property the business might own?

Valuing your business is about working out how much your business is worth so you can set the right price when selling.

There are different ways to value your business. Three of the most common valuation methods are:

1. Analysing your market – compare your business to similar businesses on the market or that have recently been sold. While this is not a formal valuation, it does provide a guide to your possible market price.
2. Calculating a business’s net worth – compare the difference between what your business owns (assets) and what your business owes (liabilities). You need to consider both tangible assets (such as machinery, buildings and land) and intangible assets (such as goodwill, brand recognition and intellectual property).
3. Using return of investment (ROI) – use your business’ net profit to work out the value of your business.

You can advertise the sale of your business to potential buyers through different methods, which include:

• business brokers or real estate agents
• digital and traditional media
• your existing networks (e.g. family, friends, or employees)
• word of mouth
• current or former customers of your business

The way you advertise will depend on your business type, industry and contacts.

Check whether there are any requirements in your state or territory about what information you need to give potential buyers.

When negotiating the sale, make sure the information you give about your business is accurate and true. If you say anything or provide information that is later found to be untrue, it may be considered misleading or deceptive behaviour.

You need to agree with the buyer on a range of things, including:

• sale price
• deposit amount (usually 10% of the sale price)
• settlement period
• handover training (if any) for the buyer
• arrangements for existing staff

Often, an intermediary will draw up the sale contract for you.

Check your state or territory to find out if there are any special requirements you need to follow when preparing your contract.

You can also have a solicitor check the contract for you. The solicitor can confirm that the contract doesn’t include any false statements, and covers all aspects of the sale, including:

• all the relevant assets that are being transferred, including property, equipment, fixtures, fittings, stock, and any rights to use any names
• all the relevant liabilities, including creditors (people or businesses that your business owes money to) and the lease of the business premises
• responsibility for employees and employee entitlements, including whether employees are to be transferred with the sale
• statements about what will happen if any issues arise (for example, the buyer decides not to proceed, mistakes are discovered in the contract, etc)

There are some contract clauses that will restrict you from trading in your profession after the sale of your business. These clauses are often to prevent you from competing directly against your sold business. Make sure you’re aware of all the terms and conditions of the contract before deciding to sell.

It's important to communicate with your employees and let them know whether they'll be transferring across to the new owner or ending their employment due to the sale of the business. In both cases, a transfer of business ends an employee’s position with you. You must give your employees notice of ending their employment with you or provide payment in lieu of notice.

When employees transfer with the business, you need to give all relevant employee information to the new owner. There are some employee entitlements that the new owner must recognise and others that the new owner doesn’t have to recognise.

Consider whether Capital Gains Tax (CGT) and Goods & Services Tax (GST) apply to the sale of your business. For example, if your business is registered for GST, you may need to include GST in the price of your individual business assets or repay GST credits.

If you're selling a small business, CGT concessions may be available.

If you consider carefully what tax obligations will arise from the sale of your business you can also plan to meet them and avoid being in a debt situation. If you do find that you cannot pay your taxes on time, you may be able to get help through an ATO payment plan.

Find out more about things to consider when changing, selling or closing your business from a tax perspective on the ATO website.

Consider any insurance requirements for your business, such as run-off cover (where you are insured for any legal claims that are made after you sell your business).

Once your business is sold, you need to transfer your business to the new owner. You need to:

• transfer leases, licenses and permits
• finalise tax returns, activity statements and instalment notices
• cancel your ABN and transfer or cancel your business name

You’re still responsible for any lease agreements and obligations that are part of your business until they are transferred to the new owner. License transfers can take up to 12 months, so it’s important to plan for this early in the process.