Selling Your Company: Assets vs. Going Concern

So, you’ve built up a business and now you’re pondering the big question: If it comes time to sell my company, should I sell the assets individually or sell the whole company as a going concern? This decision isn’t just about maximizing your profits—it’s about understanding the implications behind each option. Let’s break it down!

The Basics: Selling Assets vs. Going Concern

When selling a business, you typically have two routes:

• Asset Sale: Selling individual assets of the business, like equipment, inventory, and goodwill.
• Sale of Business as a Going Concern: Selling the entire business as an ongoing entity, which includes all assets, liabilities, and operations.

Which one sounds better to you? Let’s chat about the pros and cons of each!

Asset Sale: Pros and Cons

Pros:

• Control over Valuation: You have the ability to individually price each asset. This often leads to higher total returns, depending on the market demand for those assets.
• Simplifies the Sale Process: Selling off assets might be more straightforward if the business structure is complex or if you’re dealing with various investors.

Cons:

• Potentially Higher Costs: You may incur transaction costs for each asset sold. It might feel like peeling an onion, layer by layer!
• Loss of Continuity: Selling assets separately might discourage customers or suppliers who prefer to deal with an ongoing business.

Sale as a Going Concern: Pros and Cons

Pros:

• Streamlined Transaction: You sell everything in one go, making it easier and quicker to close the deal.
• Continuity of Operations: Buyers might feel more comfortable knowing they’re taking over an ongoing business, with established customer relationships and employee teams.
• Tax Benefits: The entire transaction often qualifies for certain tax treatments or concessions that asset sales may not.

Cons:

• Complex Evaluation: Valuing an entire business is complicated, especially when it comes to goodwill and intangible assets.
• Potential Liabilities: Selling as a going concern means the buyer inherits any existing liabilities or obligations.

GST Implications for Business Sales

Now, let’s chat about the GST implications in Australia. Are you aware that the sale of a going concern is generally GST-free?
That’s right! If you sell your business as a going concern, you typically won’t have to charge GST, provided some conditions are met:

• Both buyer and seller must be registered for GST.
• The sale must include all the assets necessary for the buyer to run the business.
• A written agreement confirming the sale as a going concern is in place.

If you choose to sell your assets individually, the situation gets a bit sticky. You may have to charge GST on the sale, which could lead to extra costs for you and your buyer. Do you want to be the business owner who adds extra hurdles for potential buyers? No, thanks!

Final Thoughts on the Sale Decision

As you weigh your options, consider your long-term goals, potential tax implications, and how you want buyers to view your business. It’s a big decision, and getting it right can make all the difference in your exit strategy. Better to be prepared than to play catch-up with tax obligations down the road!

Have you had personal experience selling a business in Adelaide? What worked for you? Your story could help other business owners navigate similar decisions!