Buying an existing business is exciting, but one needs to be careful and thorough with regard to the legal issues involved. Here are some things to look out for
When you decide to go into business for yourself, starting from scratch isn’t the only way to go about it. Another option is to invest in or buy an existing business, a move that has its own advantages. But buying a business will perhaps be one of the most important investments of your life. There are many legal issues involved in buying a business and a lawyer can assist you through the buying process to ensure that you comply with the relevant laws and that you get what you pay for. Legal due diligence can help minimise your risks and protect your investment. So, here are some things to look out for.
Ensure that the vendor provides you with the contract of sale, copy of lease and assignment of lease, Section 52 statement (or Vendor’s Statement) and other relevant documents pertaining to the business as well as the contract of sale, which incorporates your rights in relation to the representations made by the vendor during the negotiations.
The vendor must provide an assistance period prior to entering into a binding contract or at least prior to the completion or settlement of the contract in order to assess the veracity of the vendor’s claims. Also, the contract of sale must provide for the buyer to receive from the vendor release of all security interests over business assets prior to settlement including those under the Personal Properties Securities Act.
A restraint of trade clause is inserted in the contract of sale to restrict the vendor from competing with the buyer by operating a similar business within a certain distance of the business for a certain number of years.
Also ensure that permits and licensing requirements of the business are met—for example liquor licenses, food registration, planning permits for intended use of the business etc, and that the vendor provides necessary documents in relation to leasing arrangements for plant and equipment.
Apart from the above, a lawyer can provide you legal advice in relation to several matters including proper structure of the business, transfer of employees and obligations in relation to their entitlements, franchise agreements (if any), tax, including income tax, GST and capital gains tax.
If you are looking to purchase a business and need legal assistance, please contact Dinesh Joshi of Joshi Lawyers at 0430223015 or by email at dinesh@joshilawyers.com.au. This article is not intended to be legal advice and is provided purely for your information purposes. You should seek your own legal advice if you are buying or selling a business.
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