How do I sell my business properly?

Cluster: Lifecycle transitions Shape: Decision (with significant compliance backbone on tax and employment) Slug: selling-the-business Status: v1

Short version

Most people thinking about selling their business are actually thinking about three different questions at once. What is the business worth. Who's going to buy it. How do we structure the transaction so I walk away with what I expected. Each of those has its own answer, and the answers interact. If you skip any of them, the transaction either doesn't happen or doesn't deliver what you thought you were agreeing to.

The structural fork in New Zealand is between a share sale (the buyer acquires the company that owns the business) and an asset sale (the buyer acquires the assets, the company stays with you). Most buyers prefer asset sales — they get to cherry-pick what they're taking on and leave the historical liabilities behind. Most sellers prefer share sales — clean exit, no novation work, contracts and leases preserved. Which structure you end up with depends on bargaining power, the buyer's risk appetite, and how the tax and employment consequences fall.

This entry won't price your business. It won't replace the lawyer and accountant you're going to need. It maps the decision shape, surfaces the multi-domain interactions that catch sellers out, and tells you which questions to settle before you start talking to buyers.

Where to find the authoritative answer

⭐ business.govt.nz — Selling your business (business.govt.nz/business-stage-or-type/selling-closing-or-stepping-away) — operational starting point covering valuation, advisors, finding buyers, and the broad sale process. Read this before you talk to anyone.
Inland Revenue — Buying or selling a business (ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/buying-or-selling-a-business) — the tax side, including asset sale treatment, depreciation recovery, and purchase price allocation rules. Don't sign anything before reading this with your accountant.
Inland Revenue — Zero-rated supplies (going concern) (ird.govt.nz/gst/charging-gst/zero-rated-supplies) — the GST going-concern rules. Getting this right or wrong is the difference between a clean settlement and a large tax bill on either side.
Goods and Services Tax Act 1985, section 11(1)(m) (legislation.govt.nz) — the statutory anchor for zero-rating going-concern sales.
Employment New Zealand — Selling, buying or transferring a business (employment.govt.nz) — the employment-continuity rules, including Part 6A ERA for vulnerable workers.

What to watch for

1. Asset sale or share sale isn't your choice alone. The structural decision is a negotiation, and most buyers come in wanting an asset sale because it lets them cherry-pick what they're taking on and leave the historical liabilities — known and unknown — behind. Sellers usually prefer a share sale: it's a cleaner exit, contracts and leases stay in place, and there's no novation work. But the buyer has the harder job in due diligence on a share sale, so they discount the price to cover the risk of inheriting unknown liabilities, or they push hard for warranties and indemnities that keep you on the hook after settlement. The right structural answer depends on how much historical liability risk genuinely exists, how strong the contract base is (and whether key contracts can survive an asset sale's novation process), and how clean the company's books are. Get this scoped with your lawyer and accountant before you market the business. Going to market without a clear structural preference signals to buyers that they get to choose, and they'll choose what's better for them.

2. The going-concern GST mechanics are non-negotiable and unforgiving. If you sell a business as a going concern under section 11(1)(m) of the GST Act 1985, the transaction can be zero-rated — neither side pays nor reclaims GST. To qualify, both parties must be GST-registered at the time of supply (usually settlement), the sale must include all the goods and services necessary for the continued operation of the activity, both parties must agree in writing in the sale agreement that the sale is a going concern, both must intend the activity is capable of being carried on, and the business must actually be a going concern at the time of supply. Miss any of those — for example, if you've effectively wound down operations before settlement, or if the buyer isn't yet GST-registered — and the zero-rating fails. The fallback position is that GST applies at 15%, which on a business sale is a material number. The standard ADLS sale and purchase agreement has clauses for this. The standard "plus GST if any" wording matters because if the going-concern treatment fails, the GST has to come from somewhere. Get this drafted by a lawyer experienced in business sales, not retrofitted afterwards.

3. Purchase price allocation is no longer something the parties choose independently. Historically, sellers and buyers had different incentives on how to allocate purchase price across asset categories — sellers wanted high goodwill (often not taxable), buyers wanted high stock and depreciable assets (deductible). Since 2021 the rules require that both parties allocate the purchase price consistently across asset categories, and IRD can impose an allocation if the parties don't agree. The allocation directly affects depreciation recovery (taxable income to you if depreciated assets are sold above their tax book value), the buyer's depreciation base going forward, and the tax treatment of goodwill (which depends on whether it's personal/business goodwill or local/site goodwill — different income tax treatments apply). The allocation is now part of the negotiation, not a separate exercise you each do with your own accountants. Get this on the table early — it can shift the effective price by enough to matter.

4. Employee continuity isn't automatic on an asset sale. A share sale preserves employment contracts because the company (the employer) doesn't change — just who owns it. An asset sale terminates employment by default. The usual process is a collaborative one: you give notice to employees and the buyer offers new agreements on the same or similar terms, often as a condition of the sale completing. This is workable but it's not automatic, and it depends on the buyer being willing to offer terms employees will accept. Key employees the buyer wants to retain often become a sale condition — the deal completes only if those employees sign new agreements. Holiday pay and accrued entitlements are owed by you at termination if employment doesn't continue, which is a real settlement-day cash item. Part 6A of the Employment Relations Act 2000 adds another layer for vulnerable workers (cleaners, catering, laundry, orderly services) — they have automatic continuity rights, and you can't just terminate them. Get the employment-side scoping done at the same time as the structural scoping.

5. Warranties and indemnities are where the deal goes after settlement. The price gets the headlines. The warranty and indemnity package is where the actual risk lives after the cheque clears. A share sale buyer will want warranties on the company's tax position, holiday pay compliance (post-Bartlett / Holidays Act issues remain live), employee entitlements, IP ownership, key contract continuity, regulatory compliance, environmental issues (where relevant), and the accuracy of financial statements. They'll also want indemnities for specific identified risks. Each warranty is a future claim path. Negotiate the time limits, the financial caps, the materiality thresholds, and the disclosure schedule — these are the levers that determine your actual exposure for the next three to seven years. The "I want to take my money and run" instinct is honest but expensive: warranties limit how cleanly you can do that. An asset sale reduces warranty exposure (because the buyer didn't acquire the company's history) but doesn't eliminate it — buyers still want assurance on the assets transferred, the IP, and the absence of known undisclosed liabilities.

6. Conditional contracts and the gap between "agreed" and "unconditional" matter more than people expect. Most business sales sign with conditions — buyer's due diligence, finance approval, landlord consent on lease assignment, key employee retention, regulatory approvals where relevant, sometimes the buyer's existing business completing a related transaction. Until all conditions are satisfied or waived, either side can walk away. The gap between agreement and unconditional can be weeks or months, and during that time you're running the business at risk — the buyer can discover something in due diligence that changes the price or kills the deal, key employees can leave, customer or supplier confidence can shift. Manage this period actively. Keep operating the business normally. Don't disclose more in due diligence than you need to. Don't make verbal representations that aren't in the agreement. Don't take your eye off the operating result, because the buyer's accountant will be looking at the trading period right up to settlement and any decline will be priced in or weaponised.

A separate point on what selling a business actually involves at SMB scale

Most NZ commentary on selling a business reads as if every transaction is a clean six-figure deal with a strategic buyer, a banker, and a well-developed pipeline. The reality at small-business scale is usually different, and naming the actual pattern is more useful than the generic framework.

The "internal buyer" pattern. The buyer is an existing employee, a co-owner you've already added, or a family member. This is the cleanest pattern because the buyer knows the business — due diligence is shorter, the warranty package is usually lighter (because they can't credibly claim ignorance of issues they were involved in), and the transition is smoother. The hard work is usually price and funding rather than process. Many internal sales use vendor finance — you lend the purchase price back to the buyer, paid down over time from the business's earnings — which works but leaves you exposed to the business until the loan is repaid. This pattern is more common than the literature suggests; if you have someone internal who could buy, scoping that conversation seriously is often the highest-value first step.

The "trade buyer" pattern. The buyer is a competitor, a supplier moving up the chain, or a customer moving down it. Trade buyers usually pay more because they're acquiring strategic value, not just earnings — your customer base, your contracts, your geographic position. They also do harder due diligence because they know enough to ask sharp questions. This pattern can deliver the best price but requires more preparation: tidied financials, clear contract documentation, IP ownership confirmed, key-person dependencies reduced. Trade buyers walk away from messy transactions because they have other options.

The "lifestyle buyer" pattern. Someone wanting to acquire a business for income and lifestyle reasons — career-changers, returning expats, recent retirees. Lifestyle buyers usually need more handholding through the transaction, often pay closer to a multiple-of-earnings number than a strategic premium, and typically require a transition period where you stay involved (sometimes paid, sometimes not). Many SMB sales land here, and the broker market is largely structured around this pattern. The work is in framing the business in terms a non-industry buyer can evaluate, and being honest about owner dependency — a business that requires the owner is not the same product as one that doesn't.

The "no buyer" pattern. No one's offering what you want, no internal candidate is ready, and the timing isn't lining up with market conditions. This is more common than commentary suggests, particularly for owner-dependent businesses in declining sectors or with concentrated customer bases. The honest options are: invest in making the business saleable (years of work, usually involving reducing owner dependency and diversifying revenue), accept a lower price than expected, or wind down rather than sell. C5 (closing the business properly) covers the last option. The trap here is holding out for a buyer who isn't coming and watching the business decline while you wait.

The reach test for sellers: which pattern are you actually in? Most SMB owners assume they're in pattern two or three when they're realistically in pattern one or four. Internal buyers are often more available than owners think, and "no buyer" scenarios are often more likely than they want to admit. Start by being honest about which pattern fits, then structure the work accordingly.

Where this entry stops

This entry doesn't cover:

Business valuation methodology — multiple methods (earnings multiples, asset-based, market comparables, discounted cash flow); the right one depends on the business, the buyer, and the structure of the deal. Get a chartered accountant who specialises in business valuations.
Drafting the sale and purchase agreement — the ADLS standard form is the usual starting point, but the deal-specific clauses (warranties, indemnities, restraints, purchase price allocation, conditions) are bespoke. Lawyer territory.
Restraint of trade clauses — enforceability, geographic scope, time limits, and consideration are all live issues; if you're being asked to sign a restraint, get advice on what's reasonable
Due diligence preparation in detail — what to organise, how to control disclosure, what to put in the data room. The broad principle is "organise it before you need it"
Specific tax planning for the proceeds — what happens to the sale proceeds, how they interact with your personal tax position, retirement planning, or any trust structures
Sector-specific sale considerations — regulated industries (financial services, alcohol, transport, medical, legal) have additional licensing and consent requirements
Cross-border or non-resident buyer issues — Overseas Investment Act 2005 consent thresholds and other regulatory questions apply
Specific dispute resolution if the deal falls over — that's a litigator conversation, not a wayfinder conversation

For all of these, get specialist advice. Selling a business is the area where the cost of the right advisors at the front end is dramatically lower than the cost of fixing things afterwards. A good business sale lawyer and a good chartered accountant earn their fees several times over on most transactions.

Last verified: 11 May 2026.

Related entries:

C4 — Succession planning — the upstream decision that often determines whether selling is even the right route
C5 — Closing the business properly — if no buyer materialises or the price isn't there, wind-down is the alternative
C2 — Shareholders agreement essentials — if you have co-owners, the agreement governs sale rights, drag-along, tag-along, and pre-emption
Entry 6 — GST registration — going-concern zero-rating depends on both parties' GST registration status
D5 — Annual compliance calendar — final returns and filings continue past settlement; the entity doesn't disappear when you sign

What lives on the references subpage:

Goods and Services Tax Act 1985, section 11(1)(m) (zero-rating of going-concern supplies); section 2 (interpretation, including definition of going concern). legislation.govt.nz.
Income Tax Act 2007, subpart EE (depreciation and depreciation recovery), purchase price allocation rules (ss GC 21 and GC 22 introduced in 2021). legislation.govt.nz.
Employment Relations Act 2000, Part 6A (continuity of employment for vulnerable workers in specified industries). legislation.govt.nz.
Inland Revenue — Buying or selling a business — tax-side guidance, depreciation recovery, asset sale tax treatment. ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/buying-or-selling-a-business.
business.govt.nz — Selling your business — operational guidance on valuation, advisors, sale process. business.govt.nz.
Employment New Zealand — Sale of business — employee continuity rules, Part 6A application, collaborative termination/re-employment process. employment.govt.nz.