If your New Years Resolution is to buy a business you might be surprised to know that buying a business can be quite a complicated process, depending on what you are buying and how you are buying it. That's not to say you shouldn't do it, if you have had a dream to buy a business, it is definitely worth doing, however getting the right advice will help you to make the best decision on what to buy and the process to buy a business. Coutts has expertise in advising clients on buying and selling businesses, including franchises, Pty Ltd companies and Sole traders. We can also advise you on the best structure to use to buy a business- you don’t need to keep the structure you are buying.
If you are buying an established business you need to first determine what exactly you are buying- stock? Equipment? A registered business name? In some cases, you might also be buying debt, employees with long service leave entitlements and a bunch of creditors you have no chance of pursuing.
A properly prepared Contract for Sale of Business will note down everything included in the sale and will also set out the conditions that you are buying the business on. Making sure the Contract is correct can involve what seems like a lot of “to and fro” between the solicitors, however, it’s the contract that protects all parties so it is vital it is correct. Even if both the seller and the buyer have agreed on the big picture items, such as the price and the date for handover, there are lots of smaller details that your solicitor will confirm, such as:
Are you buying stock? At what value?
Is the equipment included in the sale or is it lease?
Are any of the employees staying on after the sale? Do they have long service leave entitlements about to crystallise?
Do you need a licence to run the business?
Is the soon-to-be former owner prevented from opening up a competing business nearby?
Do you know you cannot buy a lease? If a business operates in a leased premises, that lease must be either assigned (transferred) to you, or, a new lease will be offered. Bear in mind it is up to the landlord to decide to you give you a lease, it is not up to the seller. What will you do if you buy a business, but cannot get a lease on your terms? It is standard for the incoming tenant to pay the landlord’s legal fees (in addition to their own) associated with transferring the lease or obtaining a new lease.
Do you know you need to pay stamp duty on purchases of businesses? You may also need to pay Capital Gains Tax and GST.
Buying a business can be an exciting time when you finally become your own boss. But there is also a lot that can go wrong. You need a trusted, legal adviser to make sure that you are getting everything you think you are getting and leaving out the things you don’t want. You need enforceable contracts to protect you if things go pear shaped. You need to understand your lease. You need to be fully aware of the financial circumstances of the business and know that all of its debts are paid. Buying a business with unpaid tax debts, pending lawsuits and old stock would be a costly purchase indeed. Good advice is often worth far more than it costs and when you use a solicitor you are paying for their expertise and your peace of mind.
For any further advice or legal assistance on this issue, please contact us at Coutts on 1300 268 887.