Due Diligence when Purchasing an existing Business
Making sure that you understand the Sale Process when buying a business can minimise your risk in the long run.
A Vendor must provide you with:
- Contract of Sale;
- Copy of the Lease; and
- Section 52 Statement (if the purchase price is less than $450,000.00). This includes the financial information regarding the business.
We suggest that you contact an accountant and provide the Section 52 Statement so they can review from an accounting point of view and provide you with advice.
An Accountant can also provide you with information regarding the profit and loss of the business, tax implications, business current tax returns etc. This is not advice a Lawyer can provide to you.
When conducting due diligence, some of the things you should be looking at are:
- If the business makes a profit and any other financial issues;
- The status of the current lease that is in place and any conditions required with its transfer;
- Any Employee contracts that will be handed over with the business;
- The condition of any equipment that comes with the business;
- Ownership of any trademarks, software, licenses etc);
- Any competing businesses;
- Whether there are any specific licences or other matters that may be required to be transferred with the business.
All of the information you obtain from the Vendor is going to be sensitive information and confidential. This is why we suggest that you have someone represent you in obtaining this information and help you make an informed decision about buying the business.
If you are looking at buying a business and require any assistance, contact Wollerman Shacklock on 03 9707 1155 or firstname.lastname@example.org.