Buying or selling a business is a large decision with a number of considerations and requirements to be addressed. It is not always possible to buy or sell a business in a short time frame.
A purchase or sale of a business will require a Contract of Sale. This is important as the contract evidences the transaction and sets out the terms which the business can be transferred between the two parties. A Contract of Sale will often be negotiated between the vendor and purchaser, and their legal representatives, and must be signed prior to settlement.
If it is a small business with a sale price of under $450,000.00, a Statement by a Vendor will be required which sets out the financial position of the business. This statement is usually obtained from the Vendor’s accountant.
Often, purchasers will require finance to meet the sale price of the business. If a lender is involved, the Contract of Sale should be made conditional upon the purchaser obtaining finance approval. Lenders will each have their own requirements and time frames to provide finance approval for the purchase of a business.
If the business operates from a leased premises, the parties will need to enter into a Transfer of Lease to remove the vendor and include the purchaser as the tenant for the property. Importantly, a Transfer of Lease requires the landlord’s approval, and the landlord may have a number of requirements prior to providing their consent. It is commonplace for a landlord to request to see the purchaser’s business experience, references and financial position.
Many businesses that are sold or purchased involve the sale of food or liquor. Any business selling food must be registered with their local council before trading. Prior to settlement, the purchaser will be required to register the business under their name with the local council for the purposes of food registration. If a business sells liquor, a liquor licence will be required and any existing liquor licence for the premises will need to be transferred to the purchaser prior to settlement.
Other considerations in business transfers include a due diligence period to allow the purchaser time to inspect any documents relating to the business and its viability, an assistance period where the vendor may continue in the business to assist in a handover to the purchaser, the value of any stock, restraint of trade, employee entitlements and the release of any security interests registered over any business assets.
Wightons Lawyers can assist with all aspects of buying or selling a business, including the preparation of Contracts, Lease documentation and business registrations. We invite you to contact our office on 03 5221 8777 to discuss how we can assist in the sale or purchase of your business.
This article is general information only and is not legal advice or a substitution for such advice. Always seek professional advice suited to your own circumstances.