Buying or starting a business – do your due diligence

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Being a business owner can bring immense joy, freedom, and satisfaction, but it can also have its problems if you buy the wrong business.

Many of our clients love the fact that owning and running their own business has enabled them to achieve financial freedom, be their own boss, work their own hours and the flexibility that goes with that, and make decisions about the direction and strategy for the business.

However, it can also be hard work, with long hours and requiring significant personal and financial investment.

Before you look at either starting or buying a business, you should do your homework. It is very important to assess your personal strengths and weaknesses, understand your marketplace, your goals and have the relevant funding in place.

Another important factor is to surround yourself with the right relevant experts who will assist in your decision making and be a sounding board on your journey. I cannot stress how important it is to have a strong relationship with your trusted advisors such as your accountant, lawyer and banker.

Once you have identified the business you want to start or purchase, you must do your homework in the form of due diligence. You must understand what you are starting or purchasing and any limitations that will affect the ability to run the business.

Due Diligence – What is it?

The popular definition is that due diligence is the investigation or exercise of care that a reasonable business or person is normally expected to take before entering into an agreement or contract with another party or an act with a certain standard of care.

You should not start or consider purchasing any business unless you conduct a thorough due diligence.

The following is an indicative list but by no means exhaustive:

  • You must understand the structure through which you wish to operate or purchase the business such as a company, partnership, trust etc.
  • Understand the taxation considerations and obligations
  • Know your employee’s obligations and rights
  • Understand the relevant accommodation considerations for the business such as leases, licences etc.
  • Have knowledge of the intellectual property (IP) that the business will need or owns
  • Be aware of any supply or distribution agreements or contracts with third parties
  • Have a thorough understanding of the financial information including historically information for the business including loans, finance obligations etc.
  • Understand what levels of stock is needed or will be available to operate efficiently

How can we help?

At FC Lawyers we have over 25 years’ experience assisting clients start a business, sell and purchase businesses in a range of industries and professional sectors.

We have conducted significant due diligence investigations and work with other relevant experts to ensure our clients interests are protected. Our team also has experience in overseas and Foreign Investment Review Board applications.

Contact our team today to discuss your options when buying or starting a business.

The information provided in this article is for general information and educative purposes in summary form on legal topics which is current at the time it is published. The content does not constitute legal advice or recommendations and should not be relied upon as such. Whilst every care has been taken in the preparation of this article, FC Lawyers cannot accept responsibility for any errors, including those caused by negligence, in the material. We make no representations, statements or warranties about the accuracy or completeness of the information and you should not rely on it. You are advised to make your own independent inquiries regarding the accuracy of any information provided on this website. FC Lawyers does not guarantee, and accepts no legal responsibility whatsoever arising from or in connection to the accuracy, reliability, currency, correctness or completeness of any material contained in this article. Links to third party websites or articles does not constitute any endorsement or approval of those sites or the owners of those sites. Nothing in this article should be construed as granting any licence or right for you to use that content. You should consult the third party’s terms and conditions of use in relation to any third-party content. FC Lawyers disclaims all responsibility and all liability (including liability for negligence) for all expenses, losses, damages and costs you might incur as a result of the information being inaccurate or incomplete in any way. Appropriate legal advice should always be obtained in actual situations.


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