A good commercial solicitor would advise you not to sell your business in a rush. This is because there’s some more work to be done before you can consider advertising that your business is for sale.
In the first instance, it is important to collate all the documents and other relevant information regarding your business. The reason for this is that it is vital that you are able to present your business properly in a professional manner to anybody that may be interested in buying your business. If you present your business in a sloppy manner, then potential buyers will not take you seriously.
Considering the above, this is what you’ll need:
- Profit & loss statements for three years
- HMRC tax returns for your business
- Lease documents and any other lease-related information
- Documentation of any leases for equipment such as a photocopier
- A full list of fixtures and equipment
- Details of any loans for your business including the amounts and payment schedules
- If appropriate a copy of the franchise agreement (only if your business is a franchise)
- Other information regarding consultants or advisers to the business
It will be necessary for you need to negotiate the structure of a deal as this will likely have notable implications on tax planning. It is recommended that a seller should discuss any tax planning issues with their accountant during the early stages of the deal. If making arrangements around the structure of the deal is left till the end, then delays can be created which in turn can attract additional costs or even cause the deal to fall through.
When negotiating the deal, there are several items on the agenda that must be covered by both parties:
- The purchase price
- The way by which the price will be calculated
- Details of when the payment will be made
- Details of how the payment will be made
- Will the transaction be a sale of shares or assets?
- What is included/excluded from the sale
- Purchase of personal assets by directors of the selling company
- Premises – are these freehold or leased?
- Transfer of pension fund
- Intellectual property rights
- Removal of directors’ personal guarantees to the bank
- Any future involvement of the seller in the business (if any)
- What, if any, competition restrictions need to be put in place?
- Service contracts/consultancy agreements
- Warranties and indemnities
- Schedule to completion
- Sellers protections
- Any exclusivity agreement
For owners of small and medium businesses and especially family run businesses it is particularly relevant to understand that time spent beforehand in presenting the business in the very best light to potential buyers is often critical for business owners who want to sell their business. As a general rule, if you are thinking of buying or selling a business and wish to avoid any legal pitfalls, then it is highly recommended that you get professional advice.