Selling a Business: Steps to Take and Legal Obligations
Whether you are retiring or starting a new endeavour, selling a business is one of the most significant transactions you will ever make. You need as much professional assistance as you can because it can be complicated and emotionally charged.
At Bradley & Bray, our commercial lawyers understand the stakes. We specialise in helping Sunshine Coast business owners go through this journey confidently. To help you prepare and avoid costly issues down the road, we’ve laid out the critical steps and legal obligations required for successfully selling a business in Australia.
Step 1: Getting Things in Order: The Essential Pre-Sale Audit
It is essential to perform a pre-sale audit before marketing your business. Buyers don’t just purchase your revenue; they also purchase your certainty. This initial stage is your chance to maximise value and streamline the succeeding steps in the process.
The Initial ‘Selling a Business’ Checklist
Valuation: Get a qualified, impartial appraisal of your company. This keeps your expectations in check and guarantees that you are selling the company at a price that can be justified.
Documentation: Gather and arrange all important financial and legal records, including contracts, tax returns, and financial statements.
Compliance Review: Address any unresolved legal or regulatory compliance concerns. A clean bill of legal health minimises leverage for a buyer during due diligence.
Step 2: Finding the Buyer and Preserving Confidentiality
Once the decision to sell is firm, the next step is identifying a buyer, whether through a broker or by exploring how to sell a business privately. Confidentiality is essential for maintaining staff morale and business continuity, regardless of the approach.
The Non-Disclosure Agreement (NDA): If you don’t go straight to Contract (which should covers confidentiality), the potential buyer must sign a legally binding NDA before you reveal any sensitive information, such as financial summaries or internal business operations. If the transaction fails, this non-negotiable document safeguards your confidential data.
Step 3: Drafting the Contract of Sale
This is the central legal document governing the entire transaction. A poorly drafted Contract of Sale exposes you to significant post-completion liabilities.
Asset Sale vs. Share Sale
The first critical structuring decision is whether you are selling the assets of the business or the shares in the company that owns the business.
| Type of Sale | What the Buyer Acquires | Legal Implications for the Seller |
|---|---|---|
| Asset Sale | Specific assets (equipment, goodwill, stock). | Generally retains historical liabilities. Simpler to structure. |
| Share Sale | The entire legal entity (company). | Buyer acquires ownership of the entity and, therefore, the risk associated with historical liabilities. |
At Bradley & Bray, we will make sure that the Sale of Business Agreement precisely outlines the terms of warranties and indemnities, the price allotted for each asset, and the extent of the sale if you choose us to be your legal counsel.
Step 4: Transferring Assets and People
The value of your business lies in its operations, which means managing the transfer of core components—your staff, intellectual property (IP), and premises—is vital.
Employee-Related Matters
In an asset sale, the buyer generally isn’t required to take on your existing employees. Unless the Sale Agreement expressly states otherwise, the seller (you) is typically liable for all termination payments, including accrued leave entitlements and redundancy pay, before settlement.
It is the seller’s responsibility to make sure that notice and termination payments are made in accordance with the Fair Work Act of 2009 and any applicable awards or agreements.
Seller’s Responsibility: Ensure you comply with the Fair Work Act 2009 and any applicable awards or agreements regarding notice and termination payments. The contract will stipulate which employees, if any, the buyer offers employment to, in which case this won’t apply.
Transfer of Entitlements: If the buyer does offer employment, the Sale Agreement must clearly detail which entitlements (like long service leave) are transferred to the buyer to manage going forward, and which remain the seller’s pre-settlement responsibility.
Intellectual Property (IP) and Data Transfer
Your most valuable assets are frequently your websites, customer lists, proprietary processes, and brand name.
IP Rights: The agreement must include explicit assignment clauses attesting to the buyer’s acquisition of all pertinent registered and unregistered intellectual property rights, including patents, trademarks, domain names, and copyrights. This needs to be explicitly stated if you intend to keep any rights (for example, by using your previous trading name for a new business).
Customer Data: The transfer of customer personal information must comply with the Privacy Act 1988 (Cth). The contract must include warranties confirming your compliant collection and storage of this data, and stipulate the mechanism for legal transfer upon settlement.
Commercial Lease Assignment
A business sale typically includes the premises. This is rarely straightforward.
Lease Assignment: The seller remains liable for the lease until the assignment to the new owner (the buyer) is formally completed and approved by the Landlord. This often requires substantial documentation and Landlord consent, a process that can cause delays if not handled professionally.
Practical Tip: Start this process early. Your Landlord’s agreement is a key condition precedent to closing the sale. However, it is important that you seek legal advice before approaching the Landlord, particularly if your business is a retail shop, to ensure you are not waiving any statutory rights for the Tenant and Guarantors to be released from their obligations under the Lease from assignment. For more detailed information on this topic, read our insights on Dealing with a Commercial Lease when Selling or Buying a Business.
Step 5: Optimising Your Tax When Selling a Business
Commercial reality dictates that the final net proceeds matter most. Minimising the tax liability is crucial when selling a business, and Australia’s capital gains tax (CGT) regime offers specific concessions for small businesses that can dramatically reduce or eliminate the tax burden on the sale.
You must work closely with your accountant and legal team early to determine eligibility for concessions such as:
The application of these concessions is often complex and depends on criteria like the net value of your business assets and turnover. Proper planning can translate into significant savings. Whilst we cannot provide taxation or accounting advice, we work closely with your accountant to ensure that you are covered from both a legal and accounting perspective.
We’re Your Trusted Legal Partner for Selling Businesses
The journey of selling businesses in Australia is a significant investment of time and capital. This process requires not only legal precision but also commercial foresight.
We invite you to review our dedicated service page for more information on our expertise in Sales and Acquisitions. For further insight into legal risks during a sale, please also see our related article: Selling a Business with Pending Litigation.
Bradley & Bray offers personalised, professional legal services to guide you through every stage—from structuring the initial agreement to final settlement. If you are a Sunshine Coast business owner contemplating a sale, contact us today to ensure your hard work results in the financially and legally secure transition you deserve.
Disclaimer: This article is general in nature and does not constitute legal advice. If you require legal advice in relation to your personal circumstances, you must formally engage our firm, or another firm to provide legal advice in relation to your matter. Bradley & Bray lawyers take no responsibility for any use of the information provided in this article.
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