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An Introduction To Selling Your Business.

An introduction to selling your business.

You’ve spent time, money and worked hard in building up your business to get it to the stage it’s finally at today. Selling a business can be stressful and complex, below is a brief summary of how to start the process.

Getting your ‘house’ in order in good time.

There is no substitute for early planning, allowing plenty of time allows you to address weaknesses, highlight potential growth areas and hence make the business more attractive to potential buyers. Taking the time to organise and make accessible financial and legal records can also make the business more attractive to better quality buyers.

As well as taking legal advice, you should also consult with other professionals early on such as accountants and tax advisors to ensure that the structure of the transaction is suited to you. Sometimes, the sale may need to complete by a certain date in order to minimise tax liabilities and legal complications.

Selling a business can be emotionally challenging, early planning can reduce the stress and improve your position in negotiations.

How to protect your business secrets.

Selling a business involves sharing confidential information such as customer and supplier lists, financial information, employee information and business strategies. You will want to ensure this information is not leaked. For business stability, you will also want to ensure that employees, customers and suppliers do not find out prematurely about the business sale.

Before you disclose such information we suggest practical measures and recommend the buyer signs up to a non-disclosure agreement to minimise unauthorised disclosure. This can prove particularly useful if the transaction doesn’t complete.

Structuring the transaction Assets vs Shares.

It is important to decide how you will structure the transaction as soon as possible as this will impact the contents of the legal documents.

If the business is owned by a company you can decide to sell the assets owned by the company or sell the whole company by selling its shares owned by the shareholders.

In an asset sale the buyer chooses which assets to take on i.e. the goodwill, certain contracts and equipment. The remainder together with liabilities stay with the seller (unless otherwise agreed). Although there are some exceptions to this (i.e. employees).

In a share sale the buyer takes over the company and acquires all the assets and liabilities of the company. Although the latter may be more attractive to a seller that is looking for a complete break from the business, the buyer will usually want the seller to remain on the hook for a number of warranties and indemnities which continue to bind the seller even after completion.

Should you have any queries regarding this, or any other Commercial matters please don’t hesitate to contact Josiah Hincks Solicitors and we would be happy to help.

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Written by Palbir Vadesha.