Buying a business is an exciting time and carries with it the opportunity of real financial success and freedom. The legal experts at Stacks will help you with all aspects of buying a business, to ensure you’re getting a good deal and can hit the ground running.
Buying a business and being your own boss can be a very attractive prospect. Acquiring an existing business means that you benefit from having an existing customer base, strong relationships with suppliers, established operational systems and experienced staff.
But it is critical that you consider and evaluate all aspects of the transaction before you commit to buy a business.
Stacks has experts in Commercial Law and Employment Law to advise you on all aspects of buying a business, including helping you to identify any challenges before you commit. We can draft or advise you on the contract for sale, ensuring that all aspects of the transaction are appropriately documented and understood. We can also help you to establish or review the business structure, make suitable lease arrangements, review workplace agreements to protect your interests and comply with legislation, and check that agreements are in place with suppliers and service providers.
Issues to consider when buying a business
- Why is the business on the market? A business may be placed on the market for any number of reasons. The owner may simply be ready to retire. Other owner-operators, who had been planning to work a few more years, may choose to sell the business and move into retirement earlier. In some cases, people with a sound business may be carrying debt that is manageable in the good times but becomes a serious burden during economic downturn. They may choose to sell rather than face pressure from financiers. Bear in mind though, that if a business is for sale because of financial difficulties, you may suffer the same challenges.
- Is the asking price fair? You should assess the capacity of the business to provide a reasonable return on your investment, after deducting an equitable salary for yourself. The seller will value the business and ensure the transaction is fair to both parties. Having invested time and money in the business, they have the right to seek a price above its asset value to recover the outlays they have made.
- How do you determine what the business is worth? The value of a business constitutes the value of tangible assets - plant, stock and equipment - and an estimated value for the intangible assets, generally termed ‘goodwill’. This includes things like having established suppliers, a client base, cash flow, trained staff and operational systems.
- What are the liabilities (debts) of the business and what impact will these have on the transaction?
- What are the taxation and revenue implications of buying the business?
- Are there any intellectual property issues that you need to be aware of?
- What arrangements will be made for existing employees of the business?
- Have all the contractual rights and obligations of the business been identified?
- Will you need to negotiate any restraint of trade provisions to protect the business?
- Have you reviewed the relevant Company Constitution and Shareholder agreements?
- Is the business structure set up appropriately for your needs?
- Are there any confidentiality or privacy issues that you need to be aware of?
- If the business leases its premises, what are the issues around transferring the lease? Are you happy with the lease terms?
Stacks can help you to work through and resolve these and any other issues relating to buying a business.
Pitfalls to be aware of when buying a business
While most people selling a business are honest about what they have to offer, there is always the risk that claims will be misleading. As a buyer, you must be cautious. Are sales as good as the owner says they are? It always helps to insist that representations made by the seller, or agents acting on their behalf, be put in writing. You should make thorough checks to validate any statements and claims that have been made about the business.
Need some advice about buying a business? Call us today