Our experienced business purchase lawyers can give you advice so that you can complete your transaction and focus on running your business.
Due diligence
When purchasing a business, it’s important to undertake due diligence. This involves looking at different aspects of the business to make sure there are no surprises after the purchase has gone through. Due diligence can also help you work out what a fair price is for the business and identify any specific warranties or indemnities that you want the seller to provide in the sale contract.
A thorough due diligence can include reviewing the existing agreements that the business has in place, their financial position, their assets and liabilities and business structure. You may also choose to bring in your accountant or other business advisers to assist you in the due diligence.
Business structure
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Frequently Asked Questions
There are several legal aspects that should be reviewed when doing your due diligence. Depending on the business these may include:
- Lease agreements and how to transfer them;
- Licensing arrangements that are in place;
- Trademarks, business names and other intellectual property that the business owns;
- Supplier and customer agreements;
- Employee entitlements that may be outstanding (like long service leave) and the contracts of senior employees;
- Any goodwill attached to the business;
- Transferring a liquor licence;
- Transferring health food registrations and licences;
- Tax and financial records to ensure there are no outstanding or significant issues; and
- The vendor’s statement (if applicable).
If you’re purchasing a business that costs less than $450,000 the seller must give you a Section 52 statement, also called a vendor’s statement. This provides some of the information that you may review in the due diligence including the financial performance of the business in the last two years.
Providing a vendor’s statement is a legal requirement, and the business purchase may be voided if the seller doesn’t provide it to you.