Issues Arising Out of Buying and Selling Businesses
Care should be taken when buying and selling businesses to ensure that the transfer is properly effected and that you, as either the vendor or purchaser, are properly protected.
Consideration should be given to what type of entity will buy the business - individual (sole trader), company, partnership or trust and the tax ramifications of the purchase or sale.
The documentation should transfer all the relevant assets and liabilities. The assets may include your property, business equipment, fixtures and fittings and any rights to use any names. The liabilities may include creditors of the business or the assignment of the lease of the business premises.
The documentation should be drawn up by a solicitor and should be checked by the other party's solicitor. You should also seek accounting advice.
The vendor must be careful in making statements prior to sale about the capabilities of the business. If the statements are not true then they may expose themselves to an action for misleading or deceptive conduct or misrepresentation.
The usual rules relating to the making of agreements (see Making an Agreement) and signing agreements (see Signing an Agreement) apply.
You also need to be aware of the effect Goods and Services Tax may have (see GST).
Relevant legal issues