Unless you are, always have been and always intend to be, a sole trader whose business will close down when you are unable to carry it on (or simply lose enthusiasm for it), you will want to plan to sell it to someone else.
Planning like that should begin many years ahead but what we are covering here is the steps to take as the time draws near, on the assumption that your exit strategy is sale. Who do you talk to to get started?
Your accountant
Your accountant will know the business well from their dealings with it over the years. For at least three years accounting periods before the sale takes place you will need to ensure that the profit and loss account and balance sheet are completely “clean”. The buyer will rely on the results when formulating an offer and you will be guaranteeing their accuracy.
Any devices used to suppress profits for tax reasons will need to be dropped even if that means paying more tax: you should achieve a better price if the profits are higher anyway. The accountant will also help you to value the business and advise you of the tax consequences of sale. If your business is a limited liability company they will also advise as to whether a share sale or an asset sale is preferable.
Your solicitor (of course!)
Your solicitor will prepare you for the “due diligence” exercise that the buyer’s solicitors will undertake. As the general rule is “let the buyer beware”, buyers always seek as much information as possible before signing the contract and also demand that you warrant the accuracy of the information. That means you will have to pay compensation if any of it is materially false.
The buyer’s “due diligence” will cover not only commercial and financial matters but also legal ones, ranging from the customer contracts that it has, any intellectual property rights, information about employment contracts, data protection compliance, and other regulatory matters. The two most time consuming aspects of the business sale procedure tend to be negotiation of the contractual wording and the due diligence exercise: you will need to ensure that you will have plenty of time in your schedule to deal with these queries as they come up!
Employees
If your business is a limited liability and you are simply selling the shares there will be no formal need to consult with employees, though it is good practice. This is because their employer will still be the company even after you have sold the shares. If however, you are simply selling the business and its assets as a going concern, there is a legal requirement to consult with employees and the question of timing, particularly in the context of negotiations that may be commercially confidential, will be often a delicate one.
And finally …
… your family
After all, you will want to make your decision on the basis of what is best for you and those most closely effected by it. You will also want to plan what to do with the proceeds of sale and (unless you are acquiring or starting up a new business instead) what to do with the extra time you will have on your hands.
For more help or information complete the form below and one of our solicitors will call you.