Wanting to Buy a Business?01-07-2022 | Resource | Brent Jones
Whether you are seeking a career change, or simply wanting to ‘be your own boss’, buying an already established business may be the ideal choice – after all, you have the premises, clients, goods or services, and suppliers ready to go.
Before you sign on the dotted line, however, there are a number of factors you should consider. Buying an established business is not without risk, and you need to be fully informed of your rights and obligations before signing a contract.
Clients are often unaware of how important it is to have the right advice from the outset. Once the contracts have been signed and the business is transferred to your name, you don't want to discover any nasty surprises! This is why it is essential to have the contract reviewed by an experienced property and commercial lawyer.
Some of the main factors to consider include the following:
1. The Contract
It is imperative that you seek legal advice before signing any contracts. An experienced lawyer can review the contract, explain all of the conditions that may apply, and help to negotiate more favourable terms on your behalf.
If you are obtaining finance to make the purchase, your lawyer may also be able to negotiate with the seller’s lawyers to make the contract conditional upon approval of your loan.
2. Due Diligence
This is the process of researching, assessing and examining the business. It is important to look at the financial state of the business, legal compliance, business assets and liabilities, client information, good will, intellectual property, taxation liabilities, lease details, employment contracts, and insurance policies, as well as identifying any hidden costs that might be incurred in the purchase.
An experienced lawyer is able to conduct the necessary due diligence as well as checking that all of the relevant permits and licenses associated with the business are up to date, and provide advice on any industry specific requirements, to ensure that you are fully informed as to the state of the business and know exactly what you are buying.
3. Exchange of Contracts
Once you have negotiated and agreed upon the price and terms of the purchase, the contract is signed and exchanged between respective lawyers, making the agreement legally binding.
Much like the purchase of a residential property, there is usually a period between the exchange of contracts and the settlement date, which is when the balance of the purchase price is paid.
During this period your lawyer can help you to obtain any necessary insurance policies, transfer or obtain licenses, finalise loan documentation or bank guarantees to comply with the terms of the lease, and change ownership details, ABN and bank details where appropriate.
Buying a business is a major decision that involves careful consideration and research to minimise potential risk. Having the right legal advice from the outset will help to protect your interests and ensure that the transaction runs as smoothly as possible. If you are thinking about buying a business contact Brent Jones at Lamrocks Solicitors on ph: 02 4731 5688.