GST And The Sale Of A Business

I was asked today the very good question “Does the sale price of a business include GST and is GST payable?”

(For the non Australian readers, GST is our Goods and Services Tax (10%) collectable by the vendor or service provider on most things – there are exceptions but not worth going in to here.)

The answers are “No” and “No” – if the business is sold as a “going concern.”

The sale of a business as a going concern is GST free if:

• everything for the business’ continued operation is supplied to the buyer
• the seller carries on the business until the day it is sold
• the buyer is registered or required to be registered for GST
• the sale is for payment
• before the sale, the buyer and seller agree in writing that the sale is of a going concern.

Example: Selling a business

You are registered for GST and you sell your florist business. The sale includes the shop, delivery vehicle, stock, equipment and all the other things necessary to continue operating the business. You continue to operate the business until the buyer takes over, the buyer is registered for GST, and you and the buyer have agreed in writing that the sale is of a going concern. This is a GST-free sale.
Always consult your accountant for a definite ruling on the sale of your specific business!

Learn about this and a lot more at my next half day workshop CLICK HERE for details.

Regards

John Denton
Committed to helping business owners realise their life’s goals through buying and selling businesses

If I Could Get OUT For What It Cost Me To Get IN, I’d Be Happy!

It happened again today! I was talking to a franchisee about her chances of selling her franchise business and she came out with the statement I hear so often from franchisees – “If I could just get out of it for what it cost me to get in to it, then I would be happy”.

I hear this so often from franchisees struggling to make a profit in their business. Usually they are in a retail situation in a shopping centre. After a few years they realise that the only people making any money are the shopping centre owners and the franchisors. In effect, the franchisee is working to keep the shopping centre owners and franchisors in the lifestyle they have come to expect!

Unfortunately, once you are IN and have invested the money, it can be very difficult to get out and recover your costs. And if the lease is in the franchisees name then they are stuck with that as well.

The first piece of advice I give anyone considering buying a franchise is “Find out how are you going to get out of it?”  They normally laugh and ignore my advice.

If you really must buy a retail franchise business in a shopping centre then do your homework first. In Australia we have such a strict Code of Conduct for Franchisors – as part of the Trade Practices Act – there is no excuse for a prospective franchisee NOT doing their homework before signing up. At least speak to existing franchisees and see how they are going, and if possible, franchisees who have left the franchise. Under the Act the franchisor must provide details in their disclosure document for you to do this.

To view the Code of Conduct for franchisors CLICK HERE and I recommend page 29 onwards.

Regards
John
“Committed to helping business owners realise their life’s dreams through buying and selling businesses!”
Thinking of buying or selling a business? Then attend my workshop on the 6th August – click on WORKSHOPS tab above.

Roger Gott on “The 7 Key Steps To Developing Your Business Ready For Sale”

“A good session if you are starting in business or have been in it for a while. Until you know what is required to sell a business, you will find it difficult to create a successful one.”
Roger Gott – Cove Health Clubs
www.covehealthclub.com.au

Steve Laing on the half day workshop “The 7 Key Steps To Developing Your Business Ready For Sale”

“It doesn’t matter if you are planning to sell next year, in five years, or in twenty – at some point it is likely that you will be looking to sell it.  Before you do, it is essential that you know what your business is worth on the market.

If you haven’t thought about how you intend to sell your business when you started it up – and lets face it, many business owners don’t – then this course is essential.  You need to prepare for at least three years prior to selling, so thinking about your exit strategy early is extremely worthwhile.  I’d recommend this course to the owner of any business so that they can understand how their business is valued, and how to produce a more saleable, and valuable, asset.”
Steve Laing – Ace Scooters
www.acescooters.com.au