Goodwill (the value of the reputation of your business)
Confidential information (Customer Lists, Supply Lists, Price Lists)
Plant & equipment, furniture, chattels
Raw materials (used to produce products made by your business)
Intellectual property (names, logos, things by which your business is known, processes used in your business)
Stock on hand
Sales & Purchases of Businesses and Companies
Buying or selling a business is a major decision and (where you are the owner and operator of that business) often an emotional one.
There are a number of matters, which you should consider in undertaking this action.
A small business is one where the goodwill, plant and equipment, fittings are sold for $100,000 or less.
The Vendor must provide the Purchaser with a Form 19 giving details of the assets, liabilities and income of the business.
There are standard sale contract documents, which can be used and adapted to your needs.
What to sell?
If you own your business personally or in a partnership, then you will be selling the various assets of the business.
However, if you operate the business through a Company, the Purchaser may want to buy all of the shares in the Company and acquire the business in this way rather than purchase the business and it's assets.
You need to consider what is being sold.
Assets can include:
Other relevant matters are:
Employees - whether the Purchaser will "take over" any employees of the business
Lease of premises - if the business operates from leased premises then the Purchaser must either take a new lease or an assignment of the existing lease. The landlord's consent must be obtained. It is better for the Vendor if a new lease is done as it is usual on assignment that the Vendor remains responsible should the Purchaser default under the Lease.
Leases of plant and equipment - similar issues apply to those for a lease of premises
Outstanding orders - whether the Purchaser will take over and complete outstanding orders
Supply, customer and other contracts - the Purchaser may take these over or enter in to its own arrangements with suppliers and customers
Vendor's debtors - the Vendor usually collects any debts owed to it before the settlement date. How to advise customers of the sale of the business.
Various matters are likely to require adjustments between the Vendor and the Purchaser at settlement. These can include:
rent, rates, stock
connection of services (water, electricity, gas) - transfer to the Purchaser
Insurance - the Purchaser should take out insurance for the business and as required under any lease(s)
Telephone and fax lines - transfer to the Purchaser
Yellow Pages and other advertising.
Confidentiality - the Vendor should be required not to use any confidential information concerning the business after settlement.
Restraint of Trade - the Purchaser is buying a business and may look to protect it by requiring that the Vendor and its operators not operate a similar business for an agreed time and within an agreed radius from where the business is situated. The time and area depend on a number of factors and should be reasonable in all the circumstances.
Franchise - if the business is a franchise, there will be other issues to consider including the terms of the franchise arrangements.
Communication - any decision to sell the assets of a business or the shares in a company should be carefully considered.
It is important that both the Vendor and the Purchaser communicate to ensure that they both understand and agree on 'the deal". They should then have all relevant accounting and legal issues dealt with and properly documented. It can be a confusing and emotional time, so don't assume things. Check, ask questions, be involved, ensure that you manage the process and that you are in control of the process.
Your time and effort and any legal and accounting costs will be well spent if you avoid problems and possible costly legal action at a later date.
There are many other matters which must be carefully considered if you are buying or selling a business. The matters detailed here are indicative only.
It is important to obtain legal and accounting advice on the structure and implications of the deal.
This article is general in nature and for information only. It should not be acted upon without obtaining specific legal advice.
Content provided by Anne Hodgson & Co Lawyers
About Anne Hodgson & Co Lawyers
Anne Hodgson & Co Lawyers provides quality, timely and cost effective legal services for businesses and individuals.
Anne Hodgson has worked and been a Partner in two sizeable Melbourne CBD legal practices before establishing this firm. She has significant experience in commercial and business legal matters and in assisting clients with their personal legal matters. This firm offers clients quality legal services at a convenient location and at significantly lower rates than those charged by CBD firms. They also ensure that you receive prompt 'hands on' attention from Anne and staff.
This firm operates from purpose built premises at 81 Miller St, Carnegie in Victoria. Office hours are 9am to 5pm Monday to Friday. Appointments can also be arranged outside work hours at their office or at client's premises.