When buying or selling a business it is important to have a contract between the Seller and the Buyer setting out the terms and conditions of sale.

It is essential that you obtain advice from a solicitor before you sign a contract.

We also recommend that you obtain taxation and accounting advice from your accountant before signing a contract.

BUYING A BUSINESS

Legal Structure

Before signing any contract for purchase of a business it is necessary to consider whether a Buyer is to purchase as an individual or in another entity. The business can be operated as:

• an individual or “sole proprietor”;
  
• partnership;
  
• company; or
  
• a Trust (either a Unit Trust or Family Trust)
  
  

We can advise you on the structure which suits your needs and can assist with preparation of the documentation required for such structuring and any business name that may be required. This must be done before the contract is signed otherwise double stamp duty may apply.

Contract

Before signing any contract presented to you by the Seller or Seller’s agent we can advise you on the terms of contract and whether the contract is fair and reasonable.

A number of terms and conditions should be considered including but not limited to:

• Deposit
  
• Apportionment of Purchase Price – taxation consequences.
  
• Stock – quality of stock to be bought and stock take procedures.
  
• Work in Progress – identification and adjustments.
  
• Plant and Equipment – included in the sale and state of repair.
  
• Finance
  
• Lease – assignment or new Lease
  
• Tuition and assistance – by outgoing proprietor
  
• Restraint of competition – by outgoing proprietor
  
• Licences – required to operate business
  
• Employees – who will be retained and adjustments.
  
• Books and records of account – accuracy and right of inspection
  
• Rental agreements or advertising contracts
  
• Franchise – obligations and rights.
  

It is important that the contract be tailored to your needs and for your protection.

Searches and enquiries

Searches should be undertaken to check matters such as whether the:

• vendor is solvent;
  
• business or equipment is encumbered;
  
• appropriate approvals and consents to operate the business are in place.
  

We can undertake these searches on your behalf if you wish.

Settlement:

We can assist with:

• stamping of contracts and transfers;
  
• calculating adjustments;
  
• lodging transfers;
  
• attending at settlement.
  

SELLING A BUSINESS

When you are selling a business we can assist with preparation of the contract.

You will need to consider the terms and conditions discussed above in the contract section for Buyers.

It will be necessary for the sale price to be apportioned in accordance with your books of account.

The terms offered to the Buyer for such things such as restraint of trade and tuition and assistance to be suitable to you and to be terms with which you can comply.

We can assist you with transfer of the lease for premises and seeking landlord’s consent to such transfer.

Proceeding with the Contract

We can ensure that transfer documentation relating to the business such as transfer of business name, transfer of licenses and lease are prepared and executed.

We can assist you with completion of the contract and settlement and handover of documentation in exchange for payment of the purchase price.

Conclusion

The above matters are a guide only and not intended to be exhaustive. The circumstances of each case need to be considered. Whether you are selling or buying a business we recommend that you seek our legal advice before signing or agreeing to any business purchase or sale.

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