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Home | Property & Conveyancing Law | Buying & Selling a Business | Our Buying or Selling a Business Services

Structure

Businesses are conducted in many different ways. These could be a Company, partnership, sole trader or a trust. You will need to decide what is the most appropriate structure for the business to meet your needs when the contract for purchase is set up. You may need to take accountancy and legal advice as to which structure is best for you. Turner Freeman Lawyers are able to assist you with this process and deal with legal matters involved in setting these up.

Plant fitting fixtures

A full list of all plant equipment machinery and other items that go with the business should be included in the contract. If any of these are being depreciated, then the present written down value should be stated. This will allow you to pick up the further depreciation from that point. The overall purchase price should be apportioned between goodwill and plant and equipment. If you are selling a business you should not attribute any value to an item of plant and equipment above its written down value as any excess will be subject to income tax.

Stock

Generally trading stock is additional to the purchase price. A stock take is taken as near as possible to the handover date and paid for either directly or included in the settlement monies. Usually you are obliged to purchase only the good and saleable stock and, if an amount is specified, only up to that value.

Premises

Most businesses are conducted from some form of premises such as a shop or a factory. These can be owned, leased or occupied under some other legal arrangement. If the premises themselves are part of the sale, they will most likely be the subject of a standard real estate contract which will be interdependent with the sale of the business. All usual searches and enquiries will be necessary. Where premises are leased you need to be satisfied that there is a lease in place, there is an adequate term available, have details of the current rent and possible increases, and outgoings contributions. You must also satisfy yourself that the premises are suited to the usage and that all necessary consents are in place.  Different rules apply to retail shop leases and factory leases. Again Turner Freeman Lawyers can advise you in regard to these matters.

Contacts details

All phone, FAX, domain names, mobile phone and e-mail contacts used for the business should be transferred at settlement so that you have a continuity of contact from customers and clients. All client and customer and supplier lists should also be included.

Business name

This is generally very important from the point of identification by existing and potential clients and customers. Business names are registered to protect ownership of them. A company name is not necessarily a business name although a company can trade under its own name. The transfer and registration of any business name must be included in the contract.

Employees

If you will be continuing to employ existing staff you will need full details of the employees, their present status (full time, part time, casual etc) and their holiday and long service entitlements, and superannuation details. Check that all wages and entitlements are paid up to date. Entitlements to holidays and long service may need to be adjusted as in taking on existing employees, their continuity of employment is not broken by the takeover of the business and accumulated long service will be payable by you when the employee reaches entitlement. Employment rules and regulations can be complicated. Turner Freeman is able to offer you detailed advice in this regard.

Restraints of trade

These are promises by the seller that they will not be involved in a like or similar business which is competitive within a certain geographical area and for a fixed time. The law relating to restraints of this type is complex and depends on the nature of the business and its location. Whether such a promise ids effective and can be enforced is a significant issue. Turner Freeman can advise you in this regard.

Assistance and tuition

The contract should provide the time and frequency for which the seller will give you help in learning and running the business and to provide introductions to customers and suppliers.

Goods and Services Tax (GST)

Sales of businesses are subject to GST. However, provided the sale is a of a “going concern” the transaction can be exempt from GST provided the following requirements are met:-.

  1. The parties must agree in writing that the sale is of a going concern,
  2. Both parties must be registered  for GST and
  3. The sale must be for every component of the business sold (including such items as  goodwill, leases, plant equipment and machinery, components, and stock) such that on settlement the buyer can immediately continue  the conduct and running of the business as it was before the purchase.

If there is any doubt as to whether the exemption applies, it is advisable to obtain a ruling from the Taxation Office to clarify the situation. If the exemption does not apply then GST is payable on the sale price.

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