Sale and Purchase of Business

Business lawyers Bring Clear-Cut Advice to a Major Financial Decision

Buying or selling a business can be an exhilarating decision: perhaps you have been inspired to start a new venture or change careers, or, after many years of hard work, you are finally ready to sell your business.

As rewarding as this transaction may be, numerous technical and financial considerations can make the process confusing and overwhelming for the people involved. For example, many business sales are accompanied by a lease. Such situations may require advice from experienced business lawyers.

With a thorough understanding of the processes involved, Gavel & Page business lawyers provide you with clear and meaningful guidance by shining the light on all hidden problems and issues usually left in the dark, so the process is stress-free and your interests are protected.

What to Consider When Buying or Selling a Business

When purchasing or selling a business, the parties involved will need to discuss, understand and agree on a number of items. Depending on the nature of the business being bought or sold, this could include:

• Identifying the actual people that are party’s to the transaction, as well as the correct details of the property and business. It is not uncommon for this information to be incorrect;
• Clarifying what exactly is being bought or sold. Is it the business name, the company behind the name, or only the inventory, etc.?
• Setting the price to be paid and how the price is apportioned between goodwill and equipment;
• Outlining the deposit to be paid;
• Detailing the inventory to be included;
• Declaring whether there will be an independent valuation to determine the value of any stock to be sold;
• Tax considerations;
• Explaining the permitted uses of the premises and whether any Council approvals will be required;
• Restraints of trade;
• Training required after completion;
• Setting out the transfer of phone and fax lines; and
• Agreeing on the benefit of a website already in operation.

Business Lawyers Guide You Through a Complex Process

Specific advice for the purchase or sale of a business will depend on your individual circumstances and concerns and the nature of the business in question. According to our business lawyers, some common questions to consider include:

• Who is selling the business and who is buying it?
• Will the name of the purchaser be the purchaser’s individual name, or the name of a company? What are the tax implications of either decision? What are the risks involved in each circumstance?
• If a company is purchasing the business, will its individual director be required to provide a personal guarantee? (This is particularly common when a lease is in place that needs to be assigned to an incoming purchaser.)

These are just some important factors to take into account when deciding on the manner and structure of purchasing or selling a business. Other preliminary questions and considerations to take into account include:

• Who will be responsible for any debts attached to the business, or those carried by the owner of the business?
• Also, what is the seller required to do before selling a business or assigning a lease, according to the terms of the lease?

Owning and operating a business carries with it a number of risks. At Gavel & Page, our business lawyers guide you through the maze of competing thoughts and questions.

Important Information About Deposits

A seller may request that a deposit be paid by the purchaser prior to completion of the sale. It usually amounts to about 10% of the purchase price. Depending on agreements between the parties, the deposit may be held in trust until the sale is complete, after which time it is given to the seller.

In some cases, the parties may agree that the seller can use the deposit before completion of the sale. This can be risky, especially if the purchase does not proceed.

Including Inventory and Equipment in a Sale

The seller will need to determine which specific pieces of equipment and stock will be included in the sale, and the purchaser will need to confirm which items are expected to be included.

The items bundled into a sale could be any number of things, depending on the nature of the business. The sale of a café or restaurant, for example, may include the tables, chairs and ovens, while the sale of a manufacturing plant may include the drill presses and forklifts, and the sale of a grocer may include fresh fruit and canned foods.

It is also customary for the included equipment and stock to be repaired and reconditioned, and generally to be in good working order, prior to completion of the sale. An independent valuer may be asked to determine how much the stock is worth.

The specific items to be included in the sale will need to be laid out in the contract. It is essential to be specific in the legal documentation, so that both parties are clear and certain as to what is being purchased, unifying the numerous branches involved.

Our business lawyers provide you with the guidance necessary in exploring these issues and offer the right advice to ensure that any transaction you are involved in has been considered thoroughly, any risks minimised and interests protected.

What You Need to Know About Lease Agreements

Often, but not always, the sale or purchase of a business is accompanied by a lease agreement. That’s because, while the business and its equipment may constitute the relevant sale, the land on which the business runs may still be owned by the landlord.

The landlord may require the purchaser to enter into a lease agreement to operate the business from that location and, if so, may need to obtain advice as to the terms and conditions of the lease.