Records You Need to Sell a Business
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Are you ready to sell a business? What financial documents should you have available for a potential buyer?
Any buyer interested in your business is going to want to review the records of your business. A buyer will probably also have their accountant go through the books and records, so it is important that they are up to date, accurate and not, shall we say, “creative”. Having “creative” or “imaginative” book keeping will only scare off genuine buyers and any accountant worth their salt will be able to determine if the books have been adjusted.
A buyer will want to see at least the following documents:
- Profit and loss statements for the past 2 to 3 years. Profit and loss statements details generally two aspects of your business. Firstly, the revenue your business earns. This should be easily separated from other income such as interest earned from your own financial investments that are not part of the business sale. Secondly, the statement details all expenses of the business. Care must be taken not to carelessly include too many items in your tax return as expenses of the business if these items are not strictly expenses of the business, as this ultimately makes your business more expensive to run.
- Current balance sheet, showing all assets and liabilities of the business.
- Receipts for all payments, both in and out of your business. Make sure all outgoings costs are represented, including rent, utilities, insurance.
- Details of employee payments (this is also important for your consideration as employee entitlements are typically adjusted at settlement).
- Details of any financial software packages used in the business.
Because of the confidential nature of this material, particularly if you are going to be providing any details of suppliers and customers, a confidentiality agreement should be drawn up by your solicitor and signed by the buyer before any information is provided to a buyer. It is an unfortunate truth that, every now and then, a competitor may take the opportunity to try and obtain this sensitive information from you by posing as a buyer. As such, care must be taken.
It is also important to review all records you intend providing to a buyer with your accountant before handing it over.
Maintaining clear and accurate records of your business can help to make the process of selling your business far simpler and less stressful in the long run.
To obtain legal advice regarding your business, contact McColm Matsinger Lawyers on (07) 5443 1800.
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The content published in this Blog is in the form of academic papers and the opinions expressed herein are generalised. The information provided is for educational purposes, not specific legal advice.
The application of any principles referred to can alter from case to case and accordingly you should seek independent legal advice in respect of your individual circumstances.