Buying a business and why you need a business lawyer
Buying a business is a complex process and you will need to be very familiar with all the steps required in order to carry them out successfully.
You may not be aware of all the searches and enquiries you need to carry out to determine whether there are any issues that could affect your purchase.
An experienced business lawyer can guide you through the process of purchasing a business and alert you to any warning signs along the way..
“So what's involved with purchasing a business?”
Purchasing a business can involve a lot of back and forth negotiations between you and the sellers. You will need to be aware of what your legal obligations are, as well as key dates - knowing what you must provide to the sellers and at what stage in the transaction you need to attend to various matters can help move the transaction forward and ensure you are not in breach.
“What are the various stages of purchasing a business?”
The main legal milestones in the business purchase process are the negotiation stage, contracts stage (often called exchange), pre-completion and completion (often called settlement).
During the negotiation stage you need to satisfy yourself that this is the business you wish to buy and how much you intend to pay for it. Then, once the contract for the sale of business is agreed you and the seller will both sign and then ‘exchange’ originals (this can be done electronically). If a deposit is payable you will usually need to pay this within a few days after contracts are signed. Then any conditions need to be addressed and the parties should work towards satisfying them before completion (e.g you may need to obtain finance, conduct due diligence or negotiate an assignment of the lease with the landlord).
After any conditions have been satisfied, the sale of business will have to be completed. It is at this stage that the sale is finalised and ownership of the business will be officially transferred to you. During the completion process, you will pay to the seller the purchase price and any adjustments, such as your share for the rent of the business premises, may also need to be paid.
“What will a business lawyer do for me?”
When you purchase a business, you could be purchasing a variety of assets including the business name, equipment, stock in trade, client databases and contact numbers. A business lawyer will be able to clearly identify what you are purchasing. This is important because you may assume that when purchasing a business you will automatically gain ownership of the business’s website or contact numbers. This is not the case. You need to ensure that the assets you purchase (for example plant and equipment) are free from any third party charges. Your lawyer can conduct searches at the PPSR to determine this for you prior to settlement.
A business lawyer will also ensure that during the stages of exchange and completion, all of your concerns are addressed and that you are not paying for any outstanding matters that you are not responsible for.
Business lawyers have a wealth of knowledge and experience when it comes to buying businesses. It could be in your best interests to seek legal advice from a business lawyer to ensure that you are on the right track when buying a business and that all matters are settled between you and seller at completion.
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