Buying a Business - What you need to know!

A Business Aquisition Contract is a contract used to transfer the ownership of a business from a seller to a buyer.

You need to include the terms of the sale. You also must consider what is or is not included in the sale price, and optional clauses and warranties to protect both the seller and the purchaser after the transaction has been completed.

If you plan to buy an existing business, carefully analyse both the advantages and disadvantages, including history, which is likely to impact the future of the business.

Be careful not to just base your business purchase on the existing goodwill of that company. You may not see that customer again as the goodwill was really with the actual person and not the company itself.

Buying a Business – What you need to know!

What to consider:

Profits – Have you looked at previous financial records? Is the business profitable?
Assets – What assets does the business have? Does it have any intellectual property or leasing arrangements?
Liabilities – Does the business have any outstanding debts? What refunds and warranties still exist for the business? Are there debts owing on assets that are registered on the Personal Property Securities Register?
Vendor – Why and what are the reasons the business being sold?
Costs – What are the fixed and variable costs? Are there any staff costs?
Purchase agreement – Have you reviewed the purchase agreement carefully?
Tax – What kinds of tax will apply? Consider GST, Capital Gains Tax, and stamp duty implications.
Legal issues – What are the legal agreements on leases?
Business structure – What is the business structure? Do you need or want to change the business structure to suit your business needs? Do you know the different legal, tax and record keeping requirements of your current business structure, or the one you want to change to?
Partnerships – Are you buying a business with a business partner? Do you have a partnership agreement in place before you purchase.

Franchising is another option you can consider if you’re looking to buy an established business.

Franchising allows a business to operate under the name and brand of an existing business, and sell their products or services. If you think franchising could be for you, read our Franchising business topic.

Go to our website on Franchising for further information.