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Top 5 Questions Purchasers have when Buying a Business
On 31 August 2023 our Director, Amanda Crosbie and Senior Associate Solicitor, Hamish Taylor hosted a live LinkedIn Q&A answering the Top 5 Questions Purchasers have when Buying a Business.
Should I buy the shares or buy the assets?
- Depends on the situation, the client and the type of business that is being purchased.
- Typically, a purchaser will prefer to buy the assets over shares.
- Purchasing shares means you also have to take on potential liabilities.
What legal entity should I use to buy the business?
- Depends on the business, and your person situation and growth goals.
- Both your Lawyer and Accountant should be involved to ensure the proposed structure is in both your legal and financial best interest.
- Tax minimisation strategies, asset protection and commercial considerations should be made when deciding.
- The decision should be made prior to the Sale Agreement being executed.
What is the process to buy a business?
We generally become involved once the purchaser has found a business to buy.
- Preliminary discussions.
- Heads of Agreement – setting out the key aspects of the purchase.
- Due Diligence.
- Purchase Agreement – legally binding document outlining what happens before, during and after settlement and completion.
What types of due diligence should I undertake?
- Doing research on the business you would like to purchase, consider the risks, and weigh up the pros and cons of purchasing.
- Helps you determine if, and how you proceed with the purchase.
Types of due diligence:
- Commercial due diligence.
- Accounting / financial due diligence.
- Legal due diligence.
What happens to the existing employees?
- Sale of shares, nothing legal needs to occur.
- Sale of assets, more complex:
- Purchaser decides whether or not they want to keep the current employees of the business.
- Employment entitlements are negotiated in the sale of business contract.
Business Lawyers for Sydney and Newcastle
The information in this article is not legal advice and is intended to provide commentary and general information only. It should not be relied upon or used as a definitive or complete statement of the relevant law. You should obtain formal legal advice specific to your particular circumstance. Liability limited by a scheme approved under Professional Standards Legislation.