The selling of a business involves selling a bundle of assets and rights. When trading in businesses there are usually three basic types of assets that are sold:

  • Plant and Equipment;
  • Stock; and
  • Goodwill.

Plant and equipment are invariably sold at its written down value and stock is usually sold at cost price. The added financial reward that Vendors earn lies in the value in the goodwill that they can claim as part of the total purchase price. A Purchaser will usually be prepared to pay a price for goodwill if the Purchaser believes that it will provide them with access to future business security and higher profits. It is important to note that Goodwill is an intangible asset and its value is subject to the market perception of the intrinsic value of your business.

At P&B Law we can direct you through the sale of your business and guide you on issues including:

Planning your sale:
You should obtain sound Legal and Accounting advice prior to engaging a business broker or advertising your business for sale.

A Purchaser may seek to speak to customers and suppliers about your reputation, make sure you let them know in advance and that you give them no cause for concern.

Trading History:
A well-documented provable and successful trading history is an essential part of establishing your credentials in claiming the best price for the Goodwill.

Business Plan:
A well documented business plan detailing opportunities and areas for expansion may be provided.

Trade Marks:
Ensuring that an trade marks used in the connection of the business are properly registered and that they are not been infringed upon by any third party.

Key Sales Agreements:
It is prudent to properly document key sales agreements with major suppliers and customers. A Purchaser’s lawyer is likely to carefully examine agreements of this nature.

Property Leases:
Does your business depend on its location? A well-structured fair lease will ensure that you have a right to remain at the location well into the future and that you can transfer the lease easily.

Terms of Trade:
Do you offer credit terms to customers? It is important to make sure that your terms of trade are well documented and provide you with adequate protection and retention of title clauses.

Key Personnel:
You should made sure that any key personnel have well drawn employment agreements to ensure a smooth transfer with the business.

This list is not exhaustive and you should consult a properly qualified legal professional to assist you with any queries you may have regarding the selling of a business.