Buying a business
Contract law regulates the purchase of all property, including businesses. In order for a purchase to be legal and effective, the agreement must include an offer, an acceptance of that offer, an intention to create a legal relationship and consideration. Consideration is some sort of benefit to the party, and is generally a financial sum. Purchasing a business should be conducted precisely and in writing to ensure that the terms are fully understood and agreed upon. If you are buying a business you should be sure to involve a lawyer and an accountant so that they can advise you when it comes to making important decisions.
What issues can arise when buying a business?
If you don’t take proper care when buying a business, you risk the sale not being effective or legal and you may leave yourself unprotected. The most important first step is doing your due diligence, which includes carefully examining the books with your accountant to determine the value of the business. Without an accountant you may not recognise the symptoms of a financially unhealthy business.
To ensure that the sale is valid after you purchase a business, you need to ensure there is written evidence of the offer and acceptance and that there is reasonable consideration for the other party (this will generally be the price you have paid for the business). You will also need to consider whether you are buying the business individually or through a company, partnership or trust, and also what tax implications that purchase might have.
How can a lawyer help me when buying a business?
Your lawyer will help you negotiate and draft an agreement with the other party. They will examine any offers or terms put forth by the other party and assess their legality and consequences, offering you valuable advice on how best to approach the negotiation. They will also recommend what to put forth in your own offers and any terms you need to include in the agreement.
A lawyer protects your interests by preventing the other party from taking advantage of you in any way and they also help to ensure the agreement reached is legal and enforceable.
How can an accountant help me when buying a business?
If you are buying a business, an accountant will assist you in your due diligence and assessing the financial position of the business you are looking to purchase. They will also assist you in understanding and meeting any new obligations you may be taking on as the business’ new owner.