Entrepreneurs sell their businesses for various reasons. They may want to enter a new industry, plan for retirement, explore other opportunities, or just cash out due to an emergency.
If you wish to sell your business in British Columbia, hire an experienced lawyer to help you out. Corporate lawyers in BC help their clients at every stage of their deals. From preparing purchase/sale agreements to overseeing the transfers, they guide their clients along the way.
Selling a business in BC is a big deal and you shouldn’t overlook the legalities of the matter. Here are the legal considerations you should know before selling a business in British Columbia:
An entrepreneur should know the structure of the sale beforehand. Choose whether you want to go ahead with an asset sale, a share sale, or a mix of both.
An asset sale will involve the buyer purchasing specific assets without taking up the liabilities. You can consult your lawyer and mutually decide with the buyer which assets you wish to sell.
A share sale is all about selling the shares of your company. Here, the buyer receives your business assets, liabilities, and contracts.
While an asset sale is less risky for buyers, sellers often pay higher taxes for such deals. On the other hand, a share sale is easier for sellers but riskier for business buyers. Consult a corporate and/or tax lawyer to understand the legal implications of your sale before closing your deal.
Most business owners prefer confidentiality while selling their ventures in British Columbia. You can ask the buyer to sign an NDA to protect exclusive and sensitive information. Work with your lawyer to create a precise NDA that covers all the details you want to safeguard.
Preparing an NDA helps you keep your company’s financial records, debts, assets, trade secrets, operational data, and more confidential. Many agreements also prevent business buyers from contacting employees, vendors, or other stakeholders before completing the transfer.
Every buyer conducts due diligence before purchasing a business. Your lawyer will explain the legalities of this procedure. Help them in your best capacity to ensure a quick and seamless sale.
Your lawyer will inform you about the procedure for conducting legal and financial business reviews. The buyer’s lawyer may also contact you or your lawyer about the same. Keep the required financial and legal records handy to help the buyer conduct their due diligence.
The documents a business seller needs to show for due diligence are different for different companies. Common documents include permits, licenses, government approvals, tax records, and history of litigation, employee records, and more.
Work with your lawyer to ensure that you have all your documents in place. Any hindrances may lead to a deal breakdown.
Selling a business also involves transferring certain contracts to the new owner. Your corporate lawyer will help you review the necessary contracts and transfer them to the buyer as you close your deal. They will also confirm if you need to transfer your contracts.
Common contracts that need reviewing and transfer include commercial lease, franchise, supplier, and customer agreements. Work with your lawyer to answer the following questions as you review these contracts:
You and your corporate lawyer will deal with such questions to ensure a seamless sale. If any contract cannot be transferred, you will need approvals from your landlord, supplier, or any other concerned party before continuing with your deal.
You will also need to make important decisions regarding your employees while selling your business in British Columbia. You can either retain your employees and keep their contracts or terminate their contracts and allow the new owner to make fresh hires.
The decisions you make should be in tune with the BC Employment Standard Act. This act governs all obligations regarding your employees’ termination and severance packages. Your lawyer will also inform you about vacation pay, unpaid wages, and other aspects to consider while dealing with your existing employees.
Taxation is one of the most important legal considerations while selling a business in British Columbia. Your deal will require you to pay a capital gains tax and other liabilities. Consult your lawyer for details about all your tax expenditures.
If you are selling shares of your company, you may receive a Lifetime Capital Gains Exemption of up to $1 million for small businesses. You may also need to pay taxes on selling certain assets like inventory and equipment.
Make sure you have no outstanding tax obligations at the time of selling your business. Your lawyer will help you with corporate tax clearance.
If you are planning to sell your business in British Columbia, Cube Law will help you at every stage of your deal. Our corporate lawyers will draft the necessary documents, help you with negotiations, and keep you informed about the entire procedure. We will also stand by you during conflicts and resolve all your disputes seamlessly.
