There are a number of reasons why it makes economic sense to buy an existing tax implications of buying into a business. You skip the precarious start-up phase when so many businesses close. Research the business, including its market and industry, its suppliers and competitors.
If you wish to proceed, formerly register interest in buying the business with the person appointed to manage the sale. Appoint an adviser to talk to the owner’s representative. Professional advice is vital, but getting a lawyer or accountant on board also enhances your credibility as a buyer. Ask the owner why they’re selling. Compare it to the financial picture painted in the sales documents, eg the information memorandum. To get detailed information about a business that’s for sale, potential buyers must sign a confidentiality agreement. Confidential information usually includes details about the accounts, customers and suppliers.
Once you’ve registered formal interest, you can start due diligence — the process of understanding what assets, liabilities and commercial potential a business has. It should test the story the owner tells about their business. Compare the books with independent information, eg media reports, to see where the business sits in its industry. A business can be broken down into two parts — goodwill and assets.
If it has a strong customer base, great reputation and high turnover, expect to pay more for it. If the business has been neglected, expect to pay mostly for its assets. If the owner demands an inflated price for them, check if this relates to the business’s goodwill — walk away if it doesn’t. You can offer to have a gradual handover where you pay off the sale price from your profits.
Some owners prefer this because it gives them peace of mind they’re selling to people who’ll make a success of the business. Once you’ve bought a company, the seller must tell the Companies Office about any director or shareholder changes. Taxes you might have to payGSTA sale and purchase agreement should state if the sale is GST inclusive or exclusive. If it doesn’t, raise this with the seller. This should also be set out in the sale and purchase agreement. The way the sale and purchase agreement is written can affect this, so consult an accountant or tax adviser before you buy. If it’s not part of the sale, you can negotiate new employment agreements with the existing staff or look for new staff.
If you don’t need the existing staff, the seller must handle any redundancies before you take over. This process will depend on employment agreements the current employer has in place and the size of the business — those with 19 or fewer employees might be exempt from certain restructuring requirements. The redundancy process will also depend on whether employees are classed as vulnerable workers. If you want to buy a franchise, speak to current franchise holders about their experiences with that brand. A franchise is a branch of an existing business brand. The company that owns the brand sells licences — on strict conditions — to use its brand for commercial purposes. But franchises come with limitations on your choices and influence over branding, operations and growth.
Be wary of franchisors that demand large upfront fees or try to pressure you to sign. Always get a franchise lawyer to look at any agreement before signing. FANZ offers free courses and advice to those who buy franchises. Check what ongoing costs you’ll be locked into, eg for advertising and stock. Ask for a disclosure document outlining the company’s history and track record. Even if it’s not a FANZ member, a credible company should have one.
Rating form How helpful was this information? Our DIY tool helps you create contracts tailored to your business and to each person you employ. Knowing about your market and rivals is crucial, whether you’re starting, growing or well established. Use this template to help write a great plan for your new business. The legal definition, and the economic definition of taxes differ in some ways such as economists do not regard many transfers to governments as taxes. For example, some transfers to the public sector are comparable to prices. Examples include, tuition at public universities, and fees for utilities provided by local governments.
States and their functional equivalents throughout history have used money provided by taxation to carry out many functions. When expenditures exceed tax revenue, a government accumulates debt. A portion of taxes may be used to service past debts. Governments also use taxes to fund welfare and public services.