Purchase and sale of business information

The term ‘small business’ is used to describe many types of business activities (e.g. retailers, professional service providers, suppliers and the like) A small business is one where the goodwill, plant, equipment and fittings are sold for a total price of not more than $200,000.00 (not inclusive of stock).

Small businesses may be set up in a number of ways. There are four main structures used for small business:

• A one-man business;
• A partnership or joint venture, where two or more people have decided to start a business;
• A private company; and
• A business operating pursuant to a trust.

You will need to obtain independent legal advice in order to ascertain which structure is best for your business. The decision will depend on a large number of issues such as convenience, flexibility, taxation issues, and costs to set up and run the business. These issues can be quite complex and need to be fully explained.

1. Legal Factors to Consider

• Your rights in relation to representations made by the seller of the business during the negotiation process;
• Local government and town planning restrictions;
• Essential clauses that should exist in a sale of business contract e.g. restricting the seller from competing with you;
• Occupier’s Liability – as an occupier of business premises, you are responsible for the safety of visitors entering and remaining on your business premises. Maintaining safe business premises and taking out insurance cover for any accidents are the first steps in your obligations in this area;
• Registration of a business name and incorporation;
• Retail leases legislation;
• Contract Law;
• Franchise agreements;
• Consumer protection legislation such as the Commonwealth Trade Practices Act and the Victorian Fair Trading Act
• Protecting original ideas by use of the Patents Act, Copyright Act, Design Act and trademarks;
• Employment laws including Work Cover, wages, employee benefits, enterprise bargaining, discrimination, superannuation, training and unfair dismissal;
• Income tax, including capital gains tax, sales tax and payroll tax;
• Leasing arrangements for plant and equipment; and
• Licensing requirements

2. Important Considerations

• Type of business structure best suited to you.
• Business Management.
• Adequate capital.
• Insurance requirements.
• Trade or product knowledge
• Location.
• Security of tenure of premises, registration of ownership.
• Laws you need to adhere to.
• Government assistance eligibility.

3. Documents your legal representative should examine

• (a) A Section 52 Statement that outlines the details of the financial position of the business
• (b) A copy of the sale of business contract
• (c) If an agent is being used for the sale - a Section 51 Statement stating whether the agent will help with the purchaser’s finance
• (d) A copy of any lease and assignment (if any)
• (e) If real estate property is being sold with the business, a copy of the Section 32 Vendor’s Statement advising the purchaser of any matters affecting the property

4. Issues your legal practitioner will deal with

• Zoning restrictions
• Permits and licenses required
• Rates and other outgoings payable

Ongoing legal advice is imperative for a small business owner in the proper running of the business and enabling the business to bear profits. Small business owners should regularly seek sound legal and business advice.

Company & Business Name Search  www.search.asic.gov.au/gns001.htm/

Consumer Affairs Victoria  www.consumer.vic.gov.au

S52 Statement for the Vendor of a Small Business ea statement vendor small business.pdf