is important that a vendor qualifies the prospective purchaser. Accepting an
offer from a cashed-up but inexperienced, incompetent business buyer could well
prove to be expensive in the long run. That incompetent operator will soon be
looking to blame anyone except himself/herself when the business fails. To
recover his/her investment, the incompetent business operator will seek to
discover some 'misrepresentation or misleading and deceptive
conduct' - be it disclosure or non disclosure by either the vendor or the broker during the selling process.
If the buyer can show that unsubstantiated claims were made about the past
performance of the business or if the buyer can show that there was some
non-disclosure which would affect the business, he/she may have grounds for a claim against
of the possible costs of selling to an incompetent buyer are:
of Tax Returns for the previous three periods;
of plant, machinery, motor vehicles, furniture, etc. to be included in the
copy of your current lease and written evidence of any extension to the term
agreed to by the landlord;
of value of stock and the maximum value to be available on completion;
of employees available after completion;
of training you are prepared to give;
of Franchise Agreement (if applicable).
is not an exhaustive list. You should be guided by your broker as to what to
include to facilitate a sale. It is important to note, however, that the more
factual information you disclose, the less likely it is that you are sued for
Contract for Sale will be required to transfer title to your business. Your
solicitor will prepare the contract based on the information you supply and will submit it to the buyer's solicitor
business it is imperative that you carry out the necessary enquiries before you
sign anything. We will guide you through the transaction to ensure that any risk
is manageable and within reasonable guidelines. It would be prudent to also
consult your accountant about the purchase. There is never any benefit
entering into a financial commitment without full knowledge of the risks.
contract sets out the assets that are being transferred. It also sets out any
trade restraints imposed on both the vendor and the purchaser. It nominates any
licences that are to be transferred and when they are due to expire. It does
not, however, highlight peculiarities and special skills that may be required to
retain the efficiency and the profits of the present operation. If the business
is completely dependent on the special skills of the present owner you will need
to assess your ability to run such an operation
is essential that the conditions and terms of any Lease agreement be carefully
scrutinized. Your newly purchased coffee shop may not be worth much if the lease
is about to expire and the landlord has no intention of renewing the lease. And
there may well be GST implications on the purchase if the business being
purchased is not a going concern.
this is your first business venture it is essential that you set up a Tax
structure to suit you. You may want a corporate structure or a partnership or
you may elect to operate as a sole trader. Issues of income tax, capital gains
tax and personal liability need to be considered. Sooner or later, but before
signing a contract, you should also consult an accountant.
solicitor will take you through the process so as to minimize the risks when
buying a business. Ring Peter Romano on (02) 9742 5529 for more information.