Selling your business isn’t as easy as handing over the keys and stepping away. There are a number of areas you need to consider before selling your business to ensure the best result.
Below we look at two of these factors – leases and employment contracts.
Leases
A lease is considered a vital asset of a business. If your business is operating from premises that are being leased, you will need to transfer the lease to the buyer of your business.
Check the lease document to make sure it is in order, i.e. properly signed and dated and if it was registered on the title, check the title. Your lawyer can do all this for you.
Many commercial leases contain an option to renew the lease term. For example, your lease may provide an initial term of years (say three, four or five years) and an option to renew for a further specified period at the end of the initial term. The relevant clause will normally require the tenant to exercise that option by a formal notice in writing to the landlord within a specified period of time prior to the completion of the current term but not before the that time period commences. Make sure that this has all been done in the time frame specified in the lease, because any notice given by the tenant to exercise that option will not be valid if it’s given outside the specified time.
Employment agreements
When you sell your business, your employees may either:
- transfer with the business to the new owner; or
- end employment with the business.
In both cases, a transfer of business ends an employee’s position with you (the former employer) so you must give your employees notice of ending employment or provide payment in lieu of notice.
When employees transfer with the business, you’ll need to give all relevant employee information to the new owner. There are some employee entitlements that the new owner must recognise and others that the new owner doesn’t have to recognise. Either way, it’s important to communicate with your employees and let them know whether they will be transferring across to the new owner or ending their employment upon the sale.
For more information about preparing your business for sale please do not hesitate to contact us on (07) 3223 6100.
