The sale of a business is the operation by which the owner of a business transfers ownership to a transferee in return for a price.
This is a complex operation involving legal, financial and practical aspects. It is more complex than a simple sale. The interests at stake are more important, and require protection for the seller, his creditors and the purchaser. First and foremost, it is particularly important to define precisely which elements are to be transferred, and which are not, and to draw up a clear deed of transfer. In addition, it is important to diligently follow the post-assignment formalities through which creditors may oppose the sale. This can be particularly serious if total claims exceed the sale price.
To help you better understand the sale of a business, we suggest you think in terms of 5 key questions.
What is goodwill?
A business is a collection of tangible and intangible assets that enable a commercial or craft activity to be carried out. This generally includes tangible assets such as premises, equipment and inventories, as well as intangible assets such as clientele, trade names, contracts, etc.
The sale of a business concerns the sale of this set of elements.
The most important element of a business is its clientele, without which it could not exist. This clientele can be defined as all those who regularly buy from the merchant. As long as a customer base has not been established, goodwill has no existence. Consequently, the transfer of a business also includes the transfer of its clientele.
What distinguishes the sale of a business from similar situations?
→ Partnership contributions: Partnership contributions are frequently used when an individual entrepreneur decides to contribute an asset with the aim of forming a company. In return for this contribution, the partner receives shares. On the other hand, in the case of a business sale, the business is simply “sold” to a buyer. In return, the owner only receives a sum of money.
→ Location gérance: here, the owner of the business leases all or part of the business to a manager, who operates it at his or her own risk, in return for rent. All that is involved is transferring the operation of the business to another party, in exchange for a fee. However, the transfer of a business also transfers title to the property.
→ Sale of all shares: the sale of shares concerns the sale of ownership of part of a company’s share capital, while the sale of a business concerns the sale of a set of elements enabling the exercise of a commercial activity.
What constitutes a deed of sale of a business?
→ The spouse’s consent: the validity of the sale of a business by a spouse with joint property requires the consent of his or her spouse.
→ The price must be fixed or, failing that, determinable
→ The transfer deed must be in writing
→ The seller has a pre-contractual obligation to provide information
→ The buyer must have had access to the fund’s accounting documents
What are the legal formalities?
→ Pre-contractual information for employees : The seller of a business is legally obliged to inform its employees of the sale.
→ Informing third parties: publication within 15 days in the Journal d’Annonces Légales and Bulletin Officiel Des Annonces Civiles et Commerciales.
→ Registration: publication of the sale of the business must be preceded by registration for the purposes of informing the tax authorities.
How much does it cost to sell a business?
→ The services of a legal professional, a lawyer specializing in business law, are often required to draft the deed of assignment, ensure legal compliance and advise the parties throughout the process.
→ Advertising costs: the sale of a business must be announced in a legal gazette and in the Bulletin Officiel Des Annonces Civiles et Commerciales (the costs of these announcements depend on the gazette chosen and the size of the announcement). Publication of the business sale must be preceded by registration for tax purposes.
→ Tax charges: The sale of a business may have tax implications, particularly in terms of registration duty and capital gains tax. The registration duty for a business sale is made up of a budget duty, a departmental tax and a communal tax, the rates of which vary according to the sale price. It is payable on the sale price of the business, plus any charges imposed on the purchaser. The amount of the fee may not be less than €25, corresponding to the minimum collection amount.
→ Commercial lease costs: If the business is operated from leased premises, there may be costs associated with amending the lease or notifying the lessor.
It’s clear that the transfer of a business is a complex process that requires the support of a law firm. We can help you draw up your deeds of sale, as well as any additional steps you may need to take.
