Posted by: Glenn Ferguson | Date: 30 March 2020
Embarking into the world of business requires careful planning and an understanding of your legal and financial obligations.
There are several ways of entering into business. You can buy an existing business, buy the shareholding in an existing corporate business, buy a franchise or set a business up from scratch.
On the other side of the equation is when you decide to sell a business. It also requires careful planning and consideration to ensure you obtain the maximum return and are not burdened with any unforeseen consequences.
Starting a business from scratch will require careful consideration and planning.
When setting up a business, you need to:
When looking to buy a business you need to undertake a full due diligence on the business.
You will need to:
The above list is a broad indication of what is required and is by no means exhaustive. Each business will require careful consideration of what due diligence will need to be carried out.
Once the due diligence has been carried out you will need to consider the type of contract you will enter and how to finance the purchase. You may decide to purchase the business in a new structure, or you may decide to purchase the shares in the current structure. All of these issues need to be considered from a legal perspective.
When you consider selling your business, it is very important that prior to entering any contract for sale you must:
Again, this list is not exhaustive and will need to be reviewed considering nature and type of business being sold.
Often the first step before entering a formal contract will be a Heads of Agreement. This is a proposal of key terms that both the buyer and seller would like the sale contract to include.
A Heads of Agreement is usually a non-binding document. It will include a disclaimer that the proposal is not binding until both parties execute the formal sale of business contract.
The Heads of Agreement also can help to reduce your legal costs. Negotiating the terms in advance makes it easier for your lawyer to write the sale of business contract.
In Queensland, the standard sale of business contract is the ‘Real Estate Institute of Queensland (REIQ) Sale of Business Contract’.
It’s a good idea to use this contract in many situations when buying a business in Queensland so that you know you’ve covered the important terms.
However, some contracts may need to include extra clauses or special conditions into your contract. Other contracts may be applicable to share sale agreements and other more unique contracts.
Your business structure affects your business taxes, liabilities, ownership and profitability.
The four most common business structures are:
When you are planning to carry on business with another person, it is critical to ensure that there is a clear understanding and agreement with your partner or shareholders on how the business will be managed. Therefore, it is important to consider such other legal documents such as shareholders agreements.
If your business has a lease, you will need to ensure that the landlord will agree to assign the lease over.
If the lease is a retail lease, before consent can be given, the Retail Shop Leases Act 1994 (Qld) (the Act) requires that the landlord, assignor (business seller) and assignee (business purchaser) must follow the disclosure requirements.
Both the assignor and assignee must exchange a disclosure statement at least seven days before seeking the landlord’s consent. The landlord must also provide a disclosure statement and a copy of the lease to the assignee at least seven days before consenting to the assignment.
The Act also requires that:
When you buy a business in Queensland, you may need to pay transfer duty on the transfer of business assets.
Business assets can include any of the following:
Your contract will state which business assets are being transferred. Your lawyer and accountant will be able to assist you with whether you will have to pay any transfer duty, and if so, how much.
The more preparation you do before setting up, buying or selling a business in Queensland, the better your chance of success.
At FC Lawyers, our team can assist you with:
We have worked with thousands of clients in their business endeavours in a wide variety of industries and professions throughout Queensland and Australia.
Contact our team today to discuss your legal options when setting up, buying or selling a business in Queensland.