Selling A Business As A Going Concern

Selling a business as a going concern allows you to sell a business that can continue operating in its current state. There are some tax implications that make it a wonderful option for many business owners, allowing them to make a profit while the new owners get to step into a business and continue trading.

What does selling a business as a going concern mean?

Selling a business as a going concern involves a company selling a business that can operate in its current financial state. The business will still profit and operate, so the new owner can take over the business and continue trading. There are some tax implications when selling a business as a going concern, with no Goods and Service Tax payable. This makes it a profitable option for many businesses, but you need to continue operating the business until the day it is sold.

Selling a business as a going concern usually suggests the company is in good financial health and can continue trading for any other year. This can vary depending on the business, and you must do your due diligence or enlist the help of a business broker to ensure the business is the right purchase for you.

Can I sell my business as a going concern?

It must meet strict criteria to sell your business as a going concern. Your business sale must include everything needed for the continued operation of the business, where the previous owner can walk out, and the new owner can walk in with everything ready for them to continue operating.

You must also continue trading from your business until the day it is sold. The Australian tax office sets these criteria and should be followed to sell your business as a going concern.

Is there capital gains tax on the sale of a business as a going concern?

You might need to pay Capital Gains Tax (CGT) when selling a business as a going concern. Capital gains tax applies if the business was acquired on or after 19 September 1985 and will be paid as part of your income tax on any gains, with capital losses deducted. There are some small business concessions that you should be aware of:

• 15-year exemption
• 50% active asset reduction
• Retirement exemption
• Rollover exemption

Each of these concessions has specific criteria that you must meet to qualify. We recommend checking these carefully before applying for a concession and seeking financial advice where needed.

What are the tax implications when selling a business as a going concern?

When selling your business as a growing concern, you have a few tax implications to consider. Your business is usually sold GST-exempt, but your sale will be input taxed. This happens to a financial supply if the business is a company with shares sold or a partnership or trust where the underlying interests are being sold.

You will be input taxed if the sale exceeds your financial acquisitions threshold. You won’t pay GST and cannot claim input tax credits for any GST expenses. Capital gains tax might be payable, although some concessions are available for small businesses. Make sure you read through the requirements carefully to see if you qualify.

What are the benefits of selling a business as a going concern?

Selling your business as a going concern comes with a few benefits, the biggest being that you can sell it without paying Goods and Service Tax (GST). GST exemption saves you money, but you must check that you can sell your business with a going concern exemption.

The payment for your business must meet some criteria for your sale to be GST-free. The purchaser must be registered or registered for GST, and you need a written agreement between the seller and purchaser that the sale is of ongoing concern.

Another benefit is that you don’t need to worry about selling inventory or stock relating to the business, as this is all left for the new owner. You have to leave the business ready for the new owner to step in and start trading. You won’t need to worry about selling machinery or trying to clear the premises beforehand. You also leave the operating structure behind, so there is nothing for you to focus on except selling the business.

What legal considerations do I need to make when selling my business as a going concern?

You have some considerations to make when selling a business as a going concern like you do when selling any other business. You must ensure that your tax obligations are paid in full and correctly, with all paperwork completed correctly. It’s best to have professional help to avoid any issues that could delay the sale.

To sell your business as a going concern, it must be operating and ready for new owners. The sale will be void if your business is not ready or operating.

You must also consider any insurance requirements, including legal claims that could be made after selling your business. Again, legal advice will be helpful here, as a solicitor can walk you through legal considerations for your specific business or industry.

How to value a business being sold as a going concern

It is best to use a business valuer to value a business being sold as a going concern. At Benchmark Business Brokers, we have a dedicated team of business valuers that can calculate the value of a business listed as a going concern to help you decide if it is the right option. We will ensure that you get the right money for your business and that we can find suitable buyers who will continue growing your business.

How do I sell my business as a going concern?

To sell your business as a going concern with GST exemption, you need the following:

• The seller operates the business until the sale is complete
• The seller has everything the purchaser needs to carry on the operations of the business
• The seller and purchaser have agreed the sale is of a going concern, with an agreement in writing
• The purchaser is registered for GST or will register for GST
• The sale is for payment

You must show the Australian Taxation Office (ATO) that the sale falls under the going concern GST exemption, providing them with the necessary documents. You need to show the ATO that the purchaser of the business receives everything they need to continue operating, including:

• The assets required to continue business operations
• The operating processes and structure

Get in touch with a business valuation expert near you

Selling your business as a going concern is possible and comes with tax benefits, making it a profitable option for many business owners. You can find some dubious buyers, which is why you must use a business valuer and broker who can guide you through the entire process.

We have business valuation experts across Australia, and you can get in touch with them by following the details below:

• Get in touch with our business valuation experts in Brisbane
• Get in touch with our business valuation experts in Sydney
• Get in touch with our business valuation experts in Melbourne
• Get in touch with our business valuation experts in Perth
• Get in touch with our business valuation experts in Adelaide
• Get in touch with our business valuation experts on the Gold Coast
• Get in touch with our business valuation experts on the Sunshine Coast