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Home | Property & Conveyancing Law | Buying & Selling a Business

Considering Buying or Selling a Business?

If you are considering buying or selling a business there are a number of important matters you need to consider.

Before buying a business you need to carefully consider the business and financial records of it. You may need professional help by engaging your accountant or financial advisor for assistance. Rarely will the seller of a business give any guarantee as to the takings or profitability of it. You must be able to properly assess the total financial viability for yourself before proceeding. This is referred to as “due diligence”.

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FAQ

How do I know if the business is worth the price being asked?

How do I know if the business is worth the price being asked?

Before you sign the contract you must check the business records and satisfy yourself as to the true financial position of it. You may need the assistance of your accountant or financial advisor. You should insist that the seller produce all records and other documents to you including tax returns, before proceeding.

Are the premises that the business is presently run from available to me?

Are the premises that the business is presently run from available to me?

You must check the details of any lease or other right of occupancy. You should check with the local council or any other responsible authority that the premises have all necessary approvals for the business use. This is your responsibility.

What if the business I am buying is a franchise?

What if the business I am buying is a franchise?

Many businesses are franchised. Before buying you will need to be approved and, if necessary, trained by the Franchisor to conduct the business. Most franchise agreements are very long and complicated legal documents and need to be carefully checked. You must be aware of your rights and duties under the agreement. The right of the seller to transfer the franchise also needs consideration. Commonly, the seller has to offer the franchise back to the franchisor before being able to sell it on the open market.

Why do I need a written contract to buy a business?

Why do I need a written contract to buy a business?

A contract contains the details of your agreement and the rights of the parties in the transaction. It also constitutes a record of the transaction for taxation purposes particularly possible Capital Gains Tax, and is evidence of ownership.

Do I have to pay stamp duty in buying a business?

Do I have to pay stamp duty in buying a business?

Yes. Stamp duty is payable on the total of the contract price other than for stock. If a motor vehicle is included in the sale, stamp duty is payable at motor vehicle rates which is a lower rate than for the business component.

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