Join Australia's most dynamic and respected property investment community

Business sale - sell the company or sell the business assets?

Discussion in 'Small Business' started by Ace in the Hole, 19th Jul, 2016.

  1. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,514
    Location:
    Sydney
    Has anybody bought or sold a business?
    If so, did you buy/sell the business asset or shares in the company?
    I'd be interested to hear of experiences where the transaction involved buying/selling shares in the company.
    Any good or bad stories to share?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,940
    Location:
    Sydney
    It will largely depend on what the buyer wants. Most would be concerned about inheriting liabilities if they buy the shares.
     
  3. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,514
    Location:
    Sydney
    If you wanted to buy a business and the vendor only wanted a company share sale so they can greatly minimise their CGT, would you still consider buying?
    Provided they will have indemnities etc in place, is there anything to be concerned about?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,940
    Location:
    Sydney
    How can they greatly minimise CGT by selling the shares?
     
  5. pinkboy

    pinkboy Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    909
    Location:
    Mackay, Qld
    Sale Price: $1,000,000
    50% CGT Concession (>12mth ownership): $500,000 taxable.
    50% SBAAE Concession: $250,000 taxable.
    $250,000 Superannuation contribution: $0 CGT payable.

    How did I go?

    pinkboy
     
    sanj likes this.
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,940
    Location:
    Sydney
    Great.

    But how does this out come differ if selling the shares or selling the business?
     
  7. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,514
    Location:
    Sydney
    I don't know really?

    This link shows lots and lots of pros & cons for both the seller & buyer.
    An advantage to the seller doing a share sale is listed as:
    There may be a better overall return for the shareholder in a share sale transaction which includes access to tax concessions.
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,940
    Location:
    Sydney
    I don't advise in this area, but from what I know there are some minor differences from a tax point of view between selling shares v selling the business. if the same shareholder owns 90% or more of the company they can get the same concessions selling the shares as selling the company.

    NSW has recently removed duty on the transfer of shares and also removed the duty on transfers of 'goodwill' so there should be no duty concerns if a NSW company (or trust) and the company is domiciled in NSW.
     
  9. pinkboy

    pinkboy Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    909
    Location:
    Mackay, Qld
    Probably not a great deal.

    However, from all the conversation with my Accountant over the years, especially being in a situation several times for a sale, always been persuaded to do a share sale.

    Unless there are other business or trust interests inside the Company, or major skeletons in the closet within the company - they would be the reasons for a business sale.

    *P.S. - there are other ways to reduce CGT to 0% - I just listed what I perceive as the best outcome for a Company owner to write down to 0% for their best interests.

    In no way is any of this advice, as I'm just a Painter/Tiler.

    pinkboy
     
  10. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

    Joined:
    14th Jun, 2015
    Posts:
    2,098
    Location:
    Sydney & Adelaide
    Bought a business last year. It was an asset + goodwill sale, which included clientbase and business names (vendor renamed thier pty ltd and included the name itself).

    You generally dont want the company, you have no idea of any litigation past or future that may attack the entity, or any liabilties that may come back eg unpaid super, payroll tax etc
     
    Marg4000 and Terry_w like this.
  11. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,514
    Location:
    Sydney
    Forgot the link - Buying a business: which is best – an asset or share sale? | pageseager