After all the failures and successes associate with your business, you finally decide to sell it and have your next big project. You may be avoiding inter-business conflicts or want to retire. For whatever reason you want sell, you want to use due diligence just as you would if you wanted to buy one. The process involves a lot of paperwork and the right contracts to be signed. However, you may consider the below steps to have a smooth process.
How To Sell Your Business In Australia
Whether you want to sell a small or a big business, negotiation involved in each stage of selling should be documented. With this, you can avoid costly mistakes that may breed unexpected legal obligations. You can also have a letter of intent that summarizes all the conditions and terms of transactions to be made. The letter is a nonbinding agreement. Meaning, it’s not guaranteed that a sale will take place. The best part is about confidentiality. A prospective buyer cannot reveal any confidential information provided even if they don’t buy the business. You don’t want anyone to walk away from the deal then use the information for their own personal gain. Having legal guidance helps you close your business safely and legally. If you want to sell your business, below are the steps you should not miss out on:
- Have a realistic price range: There are many ways you can determine your business’s market value. Setting your business price too high will discourage buyers while setting it low will make them question your business’s worth. You may consider using the discretionary earning multiple or the discounted cash flow method to come up with a reasonable price. While there are many several types of accounting software to be used to determine the value of a business, it’s a good idea to have the best corporate law firm guide you in selling your business.
- Tax issues: Most of the assets will trigger capital gains which are treated better in any tax treatment. Short-term capital gains are treated as ordinary income and will attract more tax. Your tax advisor should review the best payments you may receive under the sale of your business. You must agree on the amount that applies to each individual asset from the purchase price. With expert planning, you can minimize the amount of tax to pay and get information on IRS allocation rules. The fact is that what may seem good to you may be bad for the buyer and vice versa.
- Reach potential buyers: Getting a good buyer means that you will be forced to conduct extensive research. You may choose to have trade publications to have the information placed on the website or in the newspaper’s ads. You have to spend some cost on this, which may be worth it if you get a good buyer.
- Negotiate like a pro: The price at which to sell is not everything, rather than the terms to which the business will sell that matters. You have to make a concession strategy by making the buyer believe he/she has received something of value, and conversely, should return the favor.
- Draft a sale agreement and have it signed: Once you are sure the deal is good, you need to put important terms of sale into a binding agreement and have the sale agreement signed. A badly written agreement cannot be enforceable. If not sure how to come up with one, your business lawyer can help you play it safe. The agreement should finalize the terms and conditions of your sale and any other negotiation you have with the buyer.
- Determine the closing: You may choose to have a checklist for closing your business to have it end in an orderly manner. With a closing business checklist, you can keep track of what needs to be completed.
- File paperwork: Once you are through with the sale, you and the buyer need to report the sale on Form 8594 to be submitted to IRS and Form 4797 to determine whether you have made gain or loss for the sale of your assets. Again, you should work this out with a tax expert or a corporate lawyer. IRS is known for its enormous legal powers when closing a business.
Speak To A Corporate Lawyer Today
The entire process of selling a business is much more complicated than when one is buying. The challenging undertaking requires one to have a corporate lawyer who has been through buying and selling of businesses. He/she can alert you on any potential liabilities or steps you may have overlooked. If you have any questions about selling your business, speak to a corporate lawyer for help. The lawyer can help you review your liability protection or analyze whether you may be exposed to any personal financial risk after your business’s sale.