FAQs on Buying and Selling Businesses: Titance Legal Insights
Navigating the complexities of buying and selling businesses involves numerous questions. This FAQ addresses the most common queries, providing clear answers and guidance for those embarking on these transactions.
Understanding Due Diligence:
"Due diligence" is a critical step for potential business purchasers. It involves evaluating the business’s viability, examining financial records, speaking with staff and suppliers, reviewing contracts, and understanding customer demographics. This thorough investigation is essential to avoid common pitfalls like poor management or inadequate capital.
The Concept of Goodwill:
Goodwill represents the intangible benefits of a business, including customer loyalty, brand reputation, and location advantages. It's a fragile asset that can be impacted by external factors like zoning changes or supply agreement cancellations. Protecting goodwill involves measures like transferring the business name, securing key employees, and implementing restraints of trade on the seller.
Licenses Required for Running a Business:
Various licenses and permits are often necessary for the legal operation of a business. These can range from general use permits for premises to specific licenses reflecting the owner's qualifications. The Business Licence Information Service in New South Wales can provide detailed information on over 380 licenses and permits.
Restraint of Trade in Business Sales:
Restraints of trade prevent the seller from engaging in similar business activities for a specified period within a defined area. This legal measure protects the purchased business’s goodwill by limiting competition from the former owner.
Impact on Staff Entitlements in Business Transactions:
The sale of a business affects staff entitlements. Employees not retained by the buyer must be compensated by the seller, including potential redundancy payments. Buyers inherit responsibilities for accrued holiday and long service leave but typically not for sick leave.
Stamp Duty Considerations:
While stamp duty on business assets was abolished in 2016, it still applies to land transfers and 'dutiable goods' involved in the business sale. This factor should be considered in the financial planning of the transaction.
GST Implications in Business Sales:
The sale of a business may attract GST unless it qualifies as a 'going concern.' Specific conditions must be met for this exemption, including the requirement for the purchaser to be GST registered. The contract for sale should outline the GST provisions clearly.
Understanding these facets of buying and selling a business can significantly impact the success and legality of the transaction. For personalized advice and detailed information, consulting with a professional experienced in business sales is recommended.
