Buying a business can be an exciting and nervous experience and it is important that you understand all the ramifications involved prior to signing any contractual agreement. Generally, we do not recommend that any purchaser or seller signs any document without obtaining proper legal advice regarding their legal obligations contained in the business sale contract.

Steps to consider prior to signing (terms to negotiate)

1. Obtain a draft copy of the business sale contract prior to making any offer.
2. Confirm the purchase price or the manner in which the purchase price will be determined.
3. Check whether a performance clause can be inserted within the business sale contract that specifies the minimum takings of the business over an agreed period of time, prior to settlement.
4. Insist on a clause being inserted allowing you to work in the business (preferably before entering into a binding contract or before settlement).
5. Ensure that you have the ability to check the financial of the business and undertake due diligence.
6. Ensure all contracts associated with the business and/or ongoing work is transferred with the business.
7. Ensure payment of the purchase price is made in stages if possible (i.e final payment placed in trust until all conditions are met).
8. Ensure all representations made by the seller and/ or the seller’s agent are in the contract.
9. Place a restraint of trade clause in the contract preventing the seller from working or commencing in a business the same, or similar to that which is being purchased, for a nominated period of time.
10. Confirm whether the employees are to be carried across with the business sale and what will occur with the employees which will be terminated upon the sale of the business.
11. Confirm what assets are being transferred and what assets are being omitted with the business sale and document them clearly and concisely.
12. Detail any special conditions or terms with the business sale. Once the above has been decided and negotiated, the contract should be sent to your solicitor prior to execution.