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Selling Your Business FAQ

August 14, 2012

Q: How do I assess the value of my business?
A: There are several ways of doing so. Here are a few examples that you can use:

  • Asset valuation
    As the name suggests, this method involves placing dollar values on each of the company's assets listed in the balance sheet. You count the physical assets such as office equipment, inventory, vehicles, prototypes (including the cost to develop such prototypes) and real property. Next is intellectual property, including trademarks, patents and such.
  • Market demand approach
    This method is done by calculating the company's earning potential based on its demand in the market. It starts by looking at the market's current size and development. Next, look at the competition--the more market rivals, the lower the company's value. However, you should also consider how secure your company is against competitors. Lastly, examine similar firms that have raised money.
  • Income valuation
    This is performed by forecasting a firm's future income and discounting it to determine its present value. Take note that start-ups are usually discounted at 30 to 60 per cent because of their uncertainty.

Q: How do I transfer ownership of my business?
A: When time comes that you want to transfer ownership of your business, either by handing it over to your children or perhaps a business partner, you can issue different classes of shares, allowing you to control their level of influence on your company.

Companies normally assign more voting rights to one class over another. For instance, a company determines that its Class A shares (although there’s no standard naming convention or classification) have more voting power than Class B shares, and issues the A shares to its executives and other major stakeholders. For additional advice on transfer ownership, contact your accountant and/or solicitor.

Q: What do I do next if my business comes to an end?
A: You need to do the following:

  • Inform the Australian Taxation Office when your business ended.
  • Tell the ATO if you've registered for Australian business number (ABN), if your business has ended or if you never traded.
  • Make sure that you've accomplished all your lodgement, reporting and payment obligations to the government agencies you regularly deal with. Remember: your tax obligations may include lodging activity statements and Pay-As-You-Go (PAYG) withholding reports, repaying Goods and Services Tax (GST) credits refunds, and settling payable tax debts.

Q What are the tax issues I need to address?
A: Aside from informing the ATO that your business has ended trading or sold (see above), you also need to address the following taxation issues:

  • Cancel registrations including the ABN, GST, Luxury Car Tax, Wine Equalisation Tax, PAYG, and Diesel and Alternative Fuel Grant Schemes, if applicable.
  • Keep your details up to date so that any statements that the ATO sends your way would be accurate. All activity statements you receive have to be lodged, no exceptions, and paid by their due date.

If you have any questions, speak with your accountant, solicitor or tax advisor, or call the ATO at 13 28 66.

Q: How do I know if I should cancel by ABN?
A: You have to cancel your ABN if:

  • Your business has ended trading.
  • You registered to operate a business, but you never did trade.
  • Your business has been sold.

Q: How do I deal with my employees after ending my business?
A: When one of your staff leaves your employment, you generally have to provide them with final payment. These are known as employee termination payments (ETPs). These ETPs may include the following:

  • A golden handshake.
  • Pay for unused days off.
  • Pay in lieu of notice.

However, ETPs do not include the following:

  • The tax-free part of bona fide redundancy payment. However, you may still have to provide a bona fide redundancy payment since the employee's job was made redundant.
  • An early retirement scheme payment.
  • Payment for unused annual leave or unused long service leave.

If there is anything that is unclear about your obligations to your employees who have stopped working for you, contact the ATO at 13 28 66.

Q: How do I cancel my business name?
A: If your business has ceased, then it no longer needs its business name. To cancel your business name, you have to file the necessary forms with the Australian Securities and Investments Commission, or ASIC. Just remember to bring your ASIC key with you when you cancel your business name.