How to Sell Your Business: The Four Point Checklist
Whether you are looking forward to retirement or you want to move onto the next project, the idea of selling a business can be daunting. But with a bit of early planning, IBB Solicitors can help you get ready for a sale.
Consider each of the following in connection with your business:
1. Are you key to the success of the business?
If all the business records are in your head, it’s time to download that information: put the back office together by organising the filing cabinet (virtual or physical) and test that someone else in the business understands it all.
If the business cannot survive without you, the buyer will take this into account in the price, so make sure that the key business relationships are transitioned to other employees and management. A strong management team will make your business more attractive to a potential purchaser.
2. Are the records and contracts in order?
What terms apply between the business and each of its customers and suppliers – can you find copies of the contracts or the terms and conditions applicable to all of them?
If you have a limited company, are the statutory books up to date and do they reflect the company’s entire history?
Have all the employees signed their employment contracts? Are the employment policies up to date and have they been communicated to all the employees?
If you use any consultants, are consultancy agreements in place to ensure that the business has the benefit of all intellectual property rights that the consultant might create for the business?
A legal audit of your records and contractual arrangements before embarking on the sale process could save you a headache later when you are negotiating the deal with the buyer and trying to do the day job at the same time.
3. Do you understand the tax and accounting considerations?
It is vital to have good tax and accounting advice. Any buyer will want to crawl all over the business’ financial history, so you’ll need someone to be ready to help answer tax and accounting queries.
How the sale is structured will often largely depend on tax considerations for you, so you’ll need a tax adviser who has experience of selling businesses. If your business is a limited company, you might be selling the shares or you might be selling all or the majority of the business and assets. You may be entitled to claim Entrepreneurs’ Relief on the sale proceeds. A good tax adviser working with you and your legal team from the outset will ensure the transaction is structured to suit your personal tax position.
4. Due diligence: Have you instructed your financial and legal advisors of your intention to sell?
When you have an interested buyer and the parties are bound by confidentiality obligations, the buyer will raise enquiries about the business. A prudent buyer will send a financial request and a legal request for information tailored to your area of business. This process takes time and, as you probably won’t want to let your employees know that you are planning to sell the business, can be a difficult juggling act for you. But this is where the work you do in advance will pay off: if you know where your records and contracts are (and that they are in good shape) and you have your financial and legal advisers ready, it will be easier to collate your responses to the buyer’s questions.
IBB Solicitors have a team of specialist corporate and commercial lawyers who buy and sell businesses for clients with the assistance of our expert employment and property solicitors and trusted relationships with firms of accounting and tax advisers. If you would like to discuss buying or selling a business, please contact us.
Contact our corporate and commercial law experts today
To speak to one of our corporate or commercial solicitors please call us today on 01895 207973 or email email@example.com. Alternatively please visit www.ibblaw.co.uk/service/corporate-and-commercial for more information on how we can help you with succession planning for your business.
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