Business Law

Purchasing a Business in NSW:

Important Things You Need to Know

March, 2015

Legal Disclaimer

This presentation is offered for general information

purposes only. It does not constitute specific legal

advice or opinion. You should not act or rely upon any

of the information contained within this seminar

without seeking the advice of a qualified solicitor who

specialises in the particular area of expertise and

jurisdiction that you require.

Presentation Outline

1. Undertake Due Diligence 4

2. Arrange Your Finance 6

3. Decide Your Purchasing Entity 9

4. Review The Contract 12

5. Undertake A Legal Due Diligence 15

6. After Completion 19

Contact Us 22

Slide #

1. Undertake Due Diligence

As a purchaser, you should conduct an initial

assessment of the business to satisfy yourself

that it is a viable purchase.

Home

1. Undertake Due Diligence

This typically involves an evaluation of the sales,

profits, assets, financial records, overheads, salary

for the owner, stock availability and key personnel.

If required, we can recommend suitably trained

people who can assist you with this assessment.

Home

2. Arrange Your Finance

You need to ensure that you have sufficient

funds to fund the purchase.

You will need to factor in Stamp Duty and unless

you are purchasing a "going concern" business,

GST.

Home

2. Arrange Your Finance

If you need to borrow funds, your lender will

generally require security for the loan including a

Mortgage, Personal Property Security Registration

and Personal Guarantees by Directors of the

purchaser if the purchaser is a company.

Home

2. Arrange Your Finance

You should

ensure that

you are well

informed

about the

terms of any

Loan and the

obligations

that you are

taking on.

Home

3. Decide Your Purchasing Entity

A prudent purchaser will have regard for risk (e.g.

exposure of your assets to liability) and taxation

minimisation when deciding on the appropriate

entity to use to purchase the business.

Home

3. Decide Your Purchasing Entity

The usual options include sole trader, partnership,

company, or trust, or a combination of one or more

of these business structures.

When considering your options, we recommend

you start with the best option from a risk

management perspective.

Home

3. Decide Your Purchasing Entity

Your accountant

should then

assess its

effectiveness

from a tax

minimisation

perspective... and

adjustments to

the structure can

be made as

required.

Home

4. Review The Contract

Before signing the

purchase Contract,

you should

understand what it is

the Vendor is selling

so that you can

assess whether it

complies with your

understanding of

what you are buying.

Home

4. Review The Contract

If you require

additional terms to

be inserted into the

Contract, or terms

that are in the

Contract to be

deleted or amended,

the time to attend to

same is BEFORE

you sign the

Contract.

Home

4. Review The Contract

After the exchange of the

signed Contracts

between the parties, both

parties will be committed

to the sale and will need

to complete all of the

things necessary to

perform their respective

obligations under the

Contract by the

designated completion

date.

Home

5. Undertake a Legal Due

Diligence Either Pre or Post Exchange

Due diligence is the process by which the

prospective purchaser of a business investigates

what is being bought to make sure that it is what

the seller has represented it to be.

During a due diligence is when you want to

uncover any "skeletons in the closet", not after

purchase completion.

Home

5. Undertake a Legal Due

Diligence Either Pre or Post Exchange

A due diligence may take

place before or after

exchange of contracts.

You may choose to

undertake the due

diligence after exchange

of contracts if you are

concerned about locking

the seller into a sale.

Home

5. Undertake a Legal Due

Diligence Either Pre or Post Exchange

Due diligence that takes

place between

exchange and

completion is a more

traditional approach

however, if time permits,

a pre-exchange legal

due diligence is the

preferred option,

because you are not

bound by a contract.

Home

5. Undertake a Legal Due

Diligence Either Pre or Post Exchange

The extent of legal due diligence is generally

governed by three factors:

1. Your understanding of the business

to be purchased;

2. The time available to conduct the

due diligence;

3. Your budget for the due diligence.

Home

6. After Completion

After completion there will still be a few things that

must be attended to.

This may include:

1. Paying Stamp Duty;

2. Registering the business name; and

3. Lodging any Commercial

Lease documents required to be

registered etc.

Home

6. After Completion

As you are now running a new business, you

should also consider:

1. Whether you need to register for GST

and/or require licences to operate the

business;

2. Protecting your intellectual property;

3. Understanding your taxation and legal

obligations;

4. Public liability;

Home

6. After Completion

4. Arranging the relevant insurances

including workers compensation;

5. Professional indemnity and

income/accident protection;

6. Accessing funds to see you through

quiet cash flow periods (e.g. an overdraft

facility); and

7. Obtaining assistance and training from a

qualified business advisor etc.(this list is not exhaustive)

Home

Turnbull Hill Lawyers – Contact Us

If you have any further questions about this topic or

you'd like to discuss a related matter, please

contact our Business Law Team.

We will endeavour to respond to your enquiry

within 24 hours.

Need Business Lawyers in NSW? Call Us

We service Newcastle, Sydney & the Central Coast

Home