I’m selling my small business – what documents do I need to have drafted? Small business lawyer series – article 1

Selling a business can be a tricky process as there are a number of key considerations that you will have to make during the process. Additionally, the documents that you prepare when selling your small business are crucial to the smooth transition of the ownership of the business from you to the purchaser.

Luckily, a small business lawyer will be able to assist with preparing the documents for the sale of your small business in a number of ways. Small business lawyers will be familiar with the overall process of buying and selling businesses, the documents that will need to be prepared, as well as any key considerations that will have to be made in relation to your particular business and its assets.

Standard contracts for the sale of business

When selling a small business, most small business lawyers will use a standard contract for the sale of business. This contract in New South Wales is referred to as the Contract for the Sale of Business 2004. Such contracts contain standard terms and conditions that are applicable to most businesses that are being sold.

Some key issues to address in a contract for the sale of business include:

• Basic details of the business and what is being transferred during the sale eg. trading stock, intellectual property, equipment and employees;
• When risk passes from the vendor to the purchaser;
• What guarantees the vendor has to provide to the purchaser;
• How matters such as the rent for the business premises, and payments for utilities such as electricity and water, will be dealt with by the parties;
• If a lease exists on the business premises, how it is to be transferred to the new owner; And
• How the contract can be terminated if there is a dispute between the parties.

Special conditions

However, many businesses may require special provisions to be drafted to respond to their specific business needs. For example, if the principal dentist of a practice is selling the practice to a purchaser, the dentist may offer to work at the practice after the sale of the business for a few months as a contractor. While this is quite a common arrangement, a special condition will need to be drafted in order to respond to this situation.

For this reason, it is a good idea to seek legal advice from a small business lawyer who can have a look at the business you are selling, and advise on how best proceed in case any special considerations need to be made.

Conclusion

Apart from preparing the contract for the sale of business, there is also the complex process of exchange and completion, during which it is very useful to have an experienced sale of business lawyer by your side. If you are considering selling your business, have a think about how you would like to arrange for the business to be sold and the type of legal assistance that you would require in order to have the sale settled quickly and efficiently.