Thinking of Buying a Business?
Buying a business can be both exciting and daunting. It is likely to be one of the biggest decisions of your life and the process can be complex and challenging. Therefore, it is important to have someone on your side who can guide you, advise you, help you to identify any potential risks and assist you in minimising these risks.
Here is our summary of key points to consider when you are looking at your next business venture.
It is important to know what you are paying for . Depending on the nature of the business, due diligence may include obtaining and reviewing the business’s financial accounts (sales, profits, debt and expenses), considering what assets are included in the sale and whether they are to an acceptable standard, verifying licences and permits, staff contracts and reviewing any intellectual property rights that are included in the purchase.
Once an Agreement is signed by both parties, it becomes a legally binding contract, therefore it is important that the Agreement is drafted correctly and that you obtain legal advice before signing the Agreement. If drafted correctly the Agreement can contain components that protect and safe guard you, such as the inclusion of further terms, restraint of trade clauses and turnover warranties.
An important part of buying a business is the lease that allows the business to continue to operate at the premises. It is paramount that you engage a solicitor to review the lease documents. It is also important that you understand your obligations under the lease, the term of the lease, rent, operational expenditures (such as rates, insurance and any other items payable by the tenant), and if there are any further terms included within the lease that could affect you and the way in which you intend to operate the business.
Ownership Structure. Depending on your personal situation, it may be beneficial for you to purchase the business through a company or trust. We recommend that you seek legal advice when considering ownership structure.
Before buying a business, we recommend that you obtain accounting advice. An accountant will be able to review your personal financial situation, the business’s financial accounts and will be able to advise you on the level of risk that will be incurred when taking on the business.
Working through the above points will take time and buying a business is not something that you should rush into. Make sure that you have time to review everything that you need to before declaring the Agreement unconditional.
If you are thinking about buying a business, or if you have any questions in relation to the above, please do not hesitate to contact a member of our commercial law team.