Operating a business can be a very rewarding experience. However, due to the risks involved it is important that all facets of a business are thought through and professional advice is sought. The following article provides a brief overview of some of the main issues to consider when buying a business in Queensland.
Business Structures
One of the most fundamental building blocks from which to develop a business is establishing a solid business structure from which to operate. The best business structure is one suited to your particular needs, taking into account factors such as your tax positions, legal liabilities and available capital. The various business structures at your disposal are:
1. Sole proprietor;
2. Partnership;
3. Company;
4. Trust; or
5. Combination of the above.
The Contract
Traditionally, the Contract will be prepared by the Seller and presented to the Buyer for consideration. Before signing a contract it is advisable to seek legal advice in order to protect your interests.
A solicitor will be able to explain your rights and liabilities under the contract and negotiate any amendments to the contract on your behalf. Things that will need to be considered include:
1. Transfer of licenses, permits and consents required for the running of the business
– It is important to be aware of what is required for the business to operate and understand any conditions attached to any licenses.
2. The price of existing stock as well as any plant and equipment to be transferred with the business
3. Transfer of the lease of business premises
– Generally, a Contract will allow for an existing lease to be transferred to the Buyer or be subject to the Buyer entering into a new lease with the Landlord. Where an existing lease is in operation and being transferred, careful consideration will need to be made to the tenancy period and any options to renew.
4. Tuition from the Seller on the running of the business
– The Buyer may negotiate to receive training on how to operate their new business before and/or after settlement so that they are familiar with the business.
5. Restraint of trade on the Seller to prevent direct competition
– In order to maintain the goodwill of the company a Buyer may negotiate to prevent the Seller from operating a similar business within a prescribed area for a certain period of time.
6. Tax liabilities
Various factors will need to be taken into account in determining whether GST and/or Stamp Duty is payable under the Contract. This is important as certain concessions or exemptions may apply.
7. Insurance
– The Contract should specify when the business assets become the risk of the Buyer.
Before risk is transferred it is vital that a Buyer considers insurance against fire, burglary, public liability, personal disability, and loss of profits.
The Best Start Ensuring professional advice is obtained is crucial to the viability of any business. This is particularly true for those purchasing a business.
