Selling your business is equally exciting, as you celebrate your success and prepare to move on to a new project or phase in your life.
However, it’s important to remember that business transactions can go disappointingly, and expensively, wrong.
That’s why it’s important to get advice from professionals such as commercial lawyers, accountants and real estate agents.
Dooley and Associates Solicitors have put together tips that will help to ensure you don’t receive any unpleasant surprises when buying or selling your business.
Tips for buying a business
1. Conduct thorough due diligence.
2. Make sure that the method used the valuing the business is accurate Think about how you will deal with stock.
3. Allow for adjustments to the purchase price in the event that anything occurs or arises that may affect the profits or value of the business, for example, employee entitlements.
4. Carefully consider apportionment of the purchase price for stamp duty purposes in terms of both the dutiable property the subject of the transaction, and its location.
5. Obtain comprehensive representations and warranties by the vendor as to the state of the business and adequate restraints form the vendor.
6. Review the deadlines for payment of stamp duty in each relevant location to avoid incurring late fees and determine whether the business will be sold as a going concern and whether you will be liable for GST on the purchase price.
7. Consider whether conditions precedent should be included in the contract.
8. Identify any key personnel and whether such personnel are to be offered new positions of employment and/or whether they are the subject of an adequate restraint of trade.
9. Identify the intellectual property to be purchased and the relevant owner. Obtain warranties and indemnities in relation to the vendor's right, title and interest to such intellectual property.
10. Ensure that any premises necessary to conduct the business will be assigned or transferred to you at completion.
Tips for selling a business
1. Make sure the method used in valuing the business is accurate and, if relevant to your business, that there is a mechanism for valuing any trading stock at completion
2. If you agree to a deferred purchase price payment structure, consider requiring security or a guarantee in respect of the outstanding amounts, minimise where possible the right of retention by the purchaser and always specify minimum values as to claims to be made by the purchaser for things such as alleged breach of warranties to ensure you get as much of the deferred payments in your pocket as possible.
3. Carefully consider apportionment of the purchase price for the purposes of CGT
4. Identify the intellectual property owned or licensed by you and determine whether such intellectual property can be assigned.
5. Ensure that you have received proper assignment of any intellectual property created by third parties prior to entering the sale contract.
6. If you are to remain liable under a lease or other contract, obtain indemnities from the purchaser.
7. Make sure you understand your obligations under your lease and other key contracts which you wish to transfer as part of the sale.
8. Co-operate with the due diligence enquiries of the purchaser, but ensure proper confidentiality provisions are entered with them before handing over your sensitive information.
9. Be aware of the possible consequences of any pre-contractual representations made
10. Ensure that you only give warranties that you are able to comply with and that any changes are fully disclosed in writing prior to completion.
For more information, contact Taylor Nicholas on 8004 1222 and Dooley & Associates Solicitors on 1300 306 335.
