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Time to put away the scissors and curling iron? Selling your hairdressing salon can be challenging if you do not understand the key elements to include in your sale agreement. You want to take care of each element of your business, like your employees and intellectual property. This article sets out key steps you will need to consider when you sell your hairdressing salon.
Your Business Sale Agreement
To sell your hairdressing salon, you will need a well-drafted sale of business agreement. A business sale agreement will include some standard terms and conditions that will govern the sale. You are also able to add and negotiate your deal with the purchaser. As the vendor, and if you are in no rush to sell, you will be in a good position to negotiate your agreement to benefit you and your employees.
Additionally, a standard contract for the sale of business will include items as part of the deal. Some of these standard terms are listed as follows.
Transfer of Business Name
You can transfer the name of your business to your purchaser. You can include this within the business sale agreement. If you and the purchaser decide to transfer your business name upon sale, you must notify the Australian Securities and Investments Commission (ASIC) of the transfer.
You will then receive a transfer number to complete the transfer. If the purchaser decides to no longer carry on with your business name and chooses a new name, you must notify ASIC of the cancellation of your business name.
You can assign any logos or pictures you have registered as a trade mark to your purchaser. A special clause in your sale of business agreement will need to reflect this. You should have a lawyer draft a clause relevant to your situation to ensure you transfer these assets to the new owner correctly.
Disclosing Client Information
The sale of business contract will generally have clauses that cover your client databases and files to the new owners.
Your sale of business contract should also include clauses outlining the settlement process. It will detail how the purchaser will make payment to the vendor and how the settlement will take effect.
Restraint of Trade Clause
Additionally, your purchaser will likely want to ensure you cannot set up a competing hairdressing salon once the sale is complete. Hence, the purchaser may include a restraint of trade clause or restrictive covenant in the sale contract. The effect of this clause is to stop you, as the previous owner, from opening a competitive business within a particular geographical area for a certain period.
However, a restraint of trade clause is only enforceable if it is “reasonable”. This means the clause cannot be too harsh or impose an unreasonable geographic or time-based burden on you. For example, a restraint of trade might be unreasonable if it applies to the entire Melbourne CBD area and does not have an expiration date on the restraint.Continue reading this article below the form
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Assigning Your Lease
If you have a lease for your business, you will need to transfer it to the new purchaser as part of your business sale. Each state or territory in Australia has different laws that deal with assigning a lease. Typically, you will need to gain your landlord’s consent before assigning the lease to the new owner.
Your Equipment and Assets
Over the years, your hairdressing salon is likely to have acquired many assets. Such assets include the fit-out of your salon and the equipment you use to perform your work. You may also include details like your furniture, electronic grooming equipment and hair styling tools in the sale of your business. It will be prudent to let your purchaser know exactly what you intend to transfer in the sale. You should outline each piece of equipment and asset in the agreement.
Your staff likely made your business a success. Accordingly, you may want to protect their interests within the sale agreement by transferring your staff to the new owner. Your qualified staff are also a great asset to your purchaser. They will be trained and certified hairdressers who will likely have a regular client base. If your purchaser agrees to retain your staff, you need to set out this transfer within the sale agreement.
Additionally, the purchaser also has no obligation to employ any of your staff. In which case, you will need to terminate your employees appropriately. You will do this by providing your employees with a notice of termination and final payment. The final payment must be made as a lump sum and paid to any entitled employees. You will also need to comply with any awards, employment contracts, enterprise agreements or other registered agreements in making the final payment. Final pay payment includes paying for any unused annual leave or accrued long service leave.
Tying Up Loose Ends
When you cease operating your salon, you must ensure you have met all the lodgement, reporting and payment obligations. For example, you may have outstanding tax obligations. This can include:
- lodging activity statements;
- PAYG withholding reports;
- repaying refunds of GST credits; and
- other outstanding debts to the Australian Taxation Office.
You will also need to cancel your Australian Business Number with the ATO.
When it comes time to sell your hairdressing salon, there are several elements to consider and take care of. Your sale of business agreement will cover standard provisions including the transfer of your business name and certain intellectual property. However, it is best practice to tailor the agreement to your business’ specifics, including equipment and assets and your employees.
If you have any questions about selling your business or transferring assets, contact LegalVision’s sale of business lawyers on 1300 544 755 or fill out the form on this page.
Frequently Asked Questions
A business sale agreement or sale of business agreement will include some standard terms and conditions that will govern your sale. Standard terms include provisions for the transfer of your business name and certain intellectual property. However, you can negotiate with your buyer to include other provisions, such as for your employees.
What you decide to include in your business sale agreements should be as specific to your business as you would like. This may include going beyond standard provisions and detailing how you will transfer your employees, assets and intellectual property. It is best practice to engage a lawyer to draft this agreement.
This depends on whether a restraint of trade clause is in place. A restraint of trade clause may limit you from operating a competing business within a certain geographical proximity to your old business, and for a certain period. If a restraint of trade clause exists in your sale agreement, it is unlikely you can open a competing hairdresser business across the road from your old one.
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