Purchasing a business is an exhilarating process that could do wonders for your personal growth and career goals. However, a business is one of the more tricky assets that you can purchase since it comes with a lot of related factors to consider.
Here are some issues that you should think about when purchasing a business:
Why the vendor is selling the business: by finding out why the vendor wants to sell the business you may be able to get some negotiating power. It is also helpful to know exactly what the vendor is selling. The vendor could be selling the trading part of the business or the holding company.
What the financial status of the business is: It is useful to get an idea of how the business is going. If it is seems to be incurring a lot of debts and liabilities then it may not be a good idea to proceed with the purchase. You could also find out what the customer base is like and if there are any sales trends that could help you decide on whether the business suits your own business aspirations.
The cost of running the business: Purchasing a business is a long-term commitment and the costs of running a business may not be something that you consider early on. You should try and anticipate how much it will cost to run the business so that you can assess your finances and see if you can afford to run such a business.
Any profits that you can predict in the business: If you can get access to the financial records you could be able to assess the future cash low and profitability of the business. Of course, you may also need to get some advice from a financial advisor to help you figure this out.
Any assets that the business owns: You should have a look at the assets that the business may own including any intellectual property, leases and other assets. This will give you a broader understanding of the business and how valuable it can be on the market.
Liabilities including debts, refunds and warranties of the business: You need to be realistic about purchasing a business. If the business has any liabilities then it is best that you become aware of them as soon as possible to prevent any nasty surprises down the track.
The purchase agreement: It is a good idea to have a lawyer review the purchase agreement to make sure you are aware of what you are entering into. A lawyer will be able to tell you if there are any clauses in the agreement which are not to your favour that you can get legal advice in relation to.
Any tax implications that will arise out of the transaction: Usually purchasing a business will attract GST, Capital Gains Tax and stamp duty. If you do some research on the potential tax implications of the purchase then you will be able to better anticipate the costs of purchasing and operating the business.
Other legal issues to consider: The structure of the business is important and you could get some legal advice on any implications arising from how the business is structured and managed.
There are numerous considerations that you will need to make before buying a business in NSW and a small business attorney is the best person to speak with. It is best to spend some time working out your options and getting legal advice as to what factors may affect you and your personal business goals.
Was this article helpful?
We appreciate your feedback – your submission has been successfully received.