A business sale is different to the sale of a residential property and comes with its own complexities and responsibilities. A lawyer can help you avoid the pitfalls that may arise if you do not handle commercial contracts correctly.
In this article, we look at how getting legal advice when selling a business can help you at five key points in the sale journey.
1. Support Through the Sale Journey
It can be easy to feel overwhelmed navigating the process and legalities of selling a business, especially if this is your first time doing so. Obtaining legal advice to help you navigate this journey can be incredibly useful.
A lawyer can ensure you complete key tasks on time and comply with all relevant laws. They may also identify ‘homework’ you may need to complete before being ready to sell your business. For example, you may need to register your trade marks or formalise agreements with third party suppliers before the sale.
2. Prepare a Sale of Business Agreement
A lawyer can help you prepare a tailored sale of business agreement to offer purchasers, and ensure that it contains all key terms and conditions relevant to you.
Their legal advice when selling a business can also guide you through the commercial viability of potential purchasers or particular courses of action. As a result, you will be able to better manage the expectations of a purchaser at an early stage. Often, purchasers will probably not have much experience in buying a business and will rely on the seller to drive the process.
There are several advantages to having a prepared agreement available from the time you list your business for sale. These include:
conveying professionalism and the credibility of your business by providing comprehensive information;
boosting the likelihood of a sale by increasing buyer confidence in their due diligence stage; and
allowing the buyer more time to get legal assistance with reviewing the contract.
3. Special Conditions
Special conditions are terms in the contract that reflect specific conditions you (or the other party) have negotiated. If you have engaged a lawyer, they can draft these conditions for you clearly.
They will also minimise the risk of a future dispute arising over a misunderstanding or misinterpretation.
4. Meeting your Legal Obligations to Employees
It is important that the employees of a business have their accrued entitlements honoured regardless of the changeover of business owners.
Generally when a business is sold, most employees will continue on in the business. It is usually a contractual requirement that the seller must pay to the purchaser a portion of employee entitlements which have accrued during their term of employment.
If you obtain legal advice when selling a business, a business lawyer will ensure the correct formulas are used to calculate entitlements.
5. Settlement Adjustments
Finally, in any business sale, the income and outgoings of the business will need to be adjusted between the parties to the settlement date.
These adjustments require complex calculations based on standard legal principles. The risk of making errors in a calculation is that you can reach an unfair outcome. So a business lawyer can be invaluable here; they will be familiar with these adjustments and can ensure a fair outcome.
Obtaining professional legal advice when selling a business will help you manage your sale well. A lawyer can ensure you abide by the relevant laws during the sale journey, and provide you with guidance when making key decisions.
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