Several factors must be considered when you decide your best course of action is selling or exiting your business. A careful and thoughtful decision-making process undertaken with astute advice is imperative to ensuring your interests are best protected.
If you have decided selling or exiting your business, the first step should involve a considered reflection on why you have reached that conclusion. Running a business can be incredibly rewarding, but it can also be both difficult and stressful. It is important that you fully understand your own position and the position of your business before taking steps to close or sell the business. It may be helpful to ask yourself a series of questions, such as:
- Why do I want to sell/exit my business?
- Have I sought adequate legal or professional advice?
- What is the commercial position of my business? That is, is the business still profitable, viable or marketable?
- Are there any limitations or restrictions that may affect my capacity to conduct business in the future?
A. Selling your Business
The next step in this process is determining whether you should sell or close your business. If you decide to sell your business, it is important that you seek the appropriate advice. Be thorough in your research of professional services, like those of business brokers, to ensure you receive the best price for your business. Seeking legal advice is always recommended, as a solicitor will be invaluable in contract construction and negotiation. This is arguably even more important if you decide to conduct the sale by owner, that is without a business broker.
A solicitor will also be able to assist in the fulfilling requirements associated with transferring your business to a new owner. For instance, change of ownership often requires the transferal of lease agreements, permits and licences. Until such transfer is made, you will continue to be subject to the obligations and liabilities arising from these agreements. It ought to be kept in mind that the transfer of certain agreements, such as certain licences, can take some time. It is thus best to seek advice and begin preparation at the earliest opportunity when selling or closing your business.
B. Exiting your Business
Alternatively, you may decide to close your business. This is often preferable where the owner has lost interest in running their business or running another business in the future, where the owner is unable to find suitable persons to pass the business on to, or the market is poor and the business has run at a loss.
Business closure will involve paying all outstanding debts (including employee payments), selling of assets, as well as ensuring all legal and tax matters and obligations are appropriately fulfilled. For example, matters that must be dealt with include cancelling your ABN, cancelling any tax registrations and cancelling any business names registered through ASIC. You must also make sure that any tax returns and/or insurance requirements have been finalised, and that the ATO is notified of the business closure. Additionally, business owners must ensure that all business records have been kept and/or disposed of in keeping with the law as prescribed by the Privacy Act 1988 (Cth) and any industry specific requirements.
Whatever decision you make, through either selling or exiting your business, the complexity of the process should not be underestimated. It is vital that proper advice is sought and utilised in a manner that will provide you with the best outcomes.
This article was authorised by Warwick Heeson.