Unlike people who are born, mature and die, a business, although owned by people, need not have the same fate.  Businesses can continue long after their founders have died.  Consequently when you have a business and it is time for you to retire (voluntarily or involuntarily) what are the questions to be considered!Table 1 shows the main ways for a business to grow or end.


 Nature of  Change


Legal Structure

of  Business












Merger/ Acquisition







Sole Trader Yes Yes N.A Yes Yes Yes
Partnership Yes Yes N.A Yes Yes Yes

Limited Company

Yes N.A Yes Yes Yes Yes
Public Listed Company Yes N.A Yes Yes N.A Yes


Irrespective of the legal structure in which you own or control your business the questions you need to answer can be dealt with by looking at:

  • Sales, and Mergers and Acquisitions;
  • Bankruptcy or Insolvency;
  • Initial Public Offerings; and

Sales, and Mergers and Acquisitions – Voluntary Retirement 

A sale of your business either as a sole trader, partner or through shares in a company may be to children, friends, through a management buy-out or sale to unrelated third parties.  A sale may be to a person not currently a competitor, or it might be a merger of your business with a competitor, or a sale of your business by a party acquiring a greater market share by someone already involved in your industry but higher or lower up the chain to you.  Irrespective of to whom the business is sold you should consider:

What is more important: The sale price or the continuation of the business?

Do you want the ownership retained by a family member, or do you want the business to be in the hands of the best person (you can find) to grow or continue the business?  If the sale is to be to a family member who in the family is to purchase the business and how will the succession best be achieved?  Do you need expert help in succession planning?

If you are only concerned in maximizing the sale price:

  • What tax breaks will you receive if you sell the business and retire?
  • What tax breaks will you receive if you sell the business and invest in another business or businesses?
  • Are you prepared to remain in the business after it is sold?  If so for how long, and on what basis: as an employee, paid or unpaid consultant, or a director of the board?
  • Are you prepared to provide a restraint of trade provision in the sale? If so for how long and for what geographical area?
  • Are you prepared to leave your name associated with the  business after it is sold?
  • Will the existing employees have to be dismissed,. or will the new owner want to taken them on?
  • If you own the premises from which the business is conducted, are the premises to be sold with the business, separately to the business or leased to the new owner?  The issue of the value of the purchase price of the premises has to be addressed. Or the rental to be paid must be negotiated.
  • If the business uses intellectual property that you own will the intellectual property be sold with the business or will you retain ownership of it and license its use to the purchaser?
  • If you are going to license intellectual property thought must be given as to how you are to assess and or verify the accuracy of the license fees paid to you by the purchaser.

Bankruptcy or Insolvency – Involuntary Retirement 

Bankruptcy occurs to individuals while insolvency happens to corporations.  Irrespective of the legal technicalities bankruptcy or insolvency is where the legal operator of the business is unable to pay the debts of the business as and when they fall due.  Generally, bankruptcy and insolvency befall a business not by choice; but despite the best efforts of an owner.

When a business ceases due to the bankruptcy of its owner(s) or the failure of a corporation due to insolvency, the decisions on whether the business is sold or closed is not that of the owner but of the type of insolvency practitioner that takes control of the business.

The owners concerns in these circumstances are:

Can you prevent yourself from being declared bankrupt by entering into a Part X arrangement?

If you are declared bankrupt what are the consequences to you continuing in a profession or trade? For instance, solicitors who are bankrupts cannot not trade on their own account.  They may be employees of a legal practice but cannot operate a legal practice as a sole trader or partner.

  • Will you have sufficient income to maintain your family life as you have done in the past?
  • What effect will bankruptcy have upon you and for how long?
  • Whether you will have assets sufficient assets to meet personal debts you may have or guarantees that you have personally given in support of the business.
  • Will you be able to continue to operate a business, due to the bankruptcy preventing you from conducting a similar business.
  • If a director of a company that has been liquidated, were you a director at a time when the company was trading insolvently? If so, you may have personal liability for the debts incurred by the company during this time.

Initial Public Offerings – Voluntary

An initial public offering or IPO is what is also known as a public float.  When a business is of a size that requires that it needs further capital to grow and the capital cannot be obtained cheaply enough by way of debt, or when you have reach a point when you are prepared to trade off a large sum of money in return for loosing absolute control of the way you run the business an IPO should be considered.


In a technical sense an IPO is a sale by you of your business for cash and or shares to a public company.  In the sense that an IPO is a sale the considerations of selling (above) are relevant.  In addition to those considerations, in considering an IPO you should consider:

  • Whether you are retiring from the business entirely or merely relinquishing some control?
  • If you are remaining in the business but with lesser control, how much control will you part with?


In relinquishing control you need to recognize that by your business being acquired by a pubic company, the company is subject to being taken over by third parties which could result in your loosing all rights to the business.  Is what you are to receive from the IPO sufficient consideration for you to take this risk?

Can the business afford the additional heavy costs of operating as a publicly listed company having regard to the need to have independent directors, pay listing fees, and ensuring that the company has appropriate compliance policies and procedures in place for such things as ASX listing rules, trade practices, occupational health and safety, employment recruitment and dismissal, intellectual property, contracts and any specific issues that are pertinent to the operations of the business?



In leaving a business you may decide to simply cease trading.  Your decision may be based upon you not being able or willing to sell something that has become part of your alter ego.  Whatever the reasons may be in closing down the considerations you need to take account of are:

  • Do you have sufficient money on hand or from the sale of assets to pay all of the debts of the business?
  • How much money will you have to pay the employees on them being made redundant?
  • What expenses will you incur in ceasing to use a business name or trade mark?
  • You must ensure that you have sufficient money to pay all creditors otherwise you must cease trading through bankruptcy or insolvency?
  • What expenses will you incur in deregistering a company if you operated your business through a corporation?
  • Is it the most appropriate course of action to simply cease trading and if so at what time?  Should it be during a financial year or will there be tax benefits if it is just after the commencement of a new financial year?
  • Will you receive a capital loss by simply ceasing to operate the business?

By ceasing to trade will you have the cash to be able to pay all of the costs associated with the cessation of the business or will you need to ascertain the costs of ceasing to trade and then after saving the money needed close the doors?  If you will need cash when will you be in a position to have the cash to close the doors?

Retiring – Next Steps…

Having regard to the numerous considerations in leaving a business you should take the time you need and when in doubt seek expert advice on the various issues that need to be taken into consideration.