The key to not only achieving, but surpassing your business and personal wealth goals will lie in the quality of the legal advice you receive.
If you are considering selling or buying a business, you run the risk of adverse legal impacts if you choose to manage the complexities involved by yourself.
In this article we outline three legal matters where specialised advice will help you avoid stressful, expensive and possibly life-changing problems in the sale or acquisition of a business.
Most people will be familiar with Transfer Duty from the sale or purchase of real property, but it can also apply to a sale of business.
Transfer Duty is a State based tax with different laws in each State. It is usually paid by the purchaser of the business, but both parties are potentially liable for payment in the event that the buyer fails to make that payment.
There are a number of particular concessions and exemptions that apply and certain transactions are not subject to Transfer Duty.
While accountants will have an understanding of Transfer Duty it is your lawyer's responsibility for attending to the advice you'll need and the transfer documentation. Good advice will ensure you have the best possible sale structure for minimising Transfer Duty costs.
A contract for sale of a business will generally contain warranties.
Warranties are a set of promises that the seller makes concerning the business. They may concern financial performance, the condition of plant and equipment, employment matters and performance of key contracts.
It is critical for the buyer to pursue a set of warranties that will avoid unexpected surprises. For instance, if a key piece of plant and equipment is in poor condition and there is not a proper warranty, it could cost the buyer hundreds of thousands of dollars to purchase a replacement.
For the seller, it is important to ensure that the warranties are fair promises on the current state of affairs, that the seller can know and control rather than make promises of future performance.
The buyer must also take reasonable responsibility and risk, which will be determined by doing their own due diligence. For instance, if warranties are too broad, the seller may face a performance warranty claim when the main cause was not the warranty being untrue but instead, the buyer operating the business poorly.
A restraint of trade clause in the sale contract is very important for a buyer as they need to ensure that they get the benefit of the goodwill they are paying for. The last thing a buyer needs when purchasing a business is for the seller to begin work for a competitor or, worse, set themselves up in direct competition.
A seller will also have very strong relationships with customers, so the buyer needs to ensure that the customers stay with the business they are buying.
Unless a seller is retiring, it is important they agree to a restraint which is fair, and worded correctly so that it gives the buyer what they are paying for without restricting the seller's ability to earn a living or trade in the future. A restraint of trade clause can be worded very broadly, and a seller could find themselves unable to work in their preferred industry, even if this is in a different capacity.
Qualified advice across a range of disciplines - law, financial planning, tax and accounting, and property - will contribute to outcomes when selling your business.
Specialist advisors working together with a common goal will mean significant expertise can be applied to your business sale. Both so that it progresses smoothly, and for achieving the best possible outcomes.
Each of these professionals has a clear role to play in your business.
You will need a legal expert to decipher or prepare often complex documentation when presenting your business for sale. The sale of your business will have significant implications for your personal financial plan and a tax and business specialist will support your decision-making and help you to minimise tax, both at the time of sale and in the future.
Should your retirement plans include changing property ownership, you will need an experienced property advocate with an understanding of your circumstances to guide your property decisions.
No single professional is qualified or specialised across all disciplines to provide the advice and help you require. The solution is collaboration.
Craig Hong and Ian Hillhouse are regular contributors for the leading mining and resources publication Resources Unearthed. They regularly provide advice across a spectrum of often complex legal matters within this sector.
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The information in this blog is intended only to provide a general overview and has not been prepared with a view to any particular situation or set of circumstances. It is not intended to be comprehensive nor does it constitute legal advice. While we attempt to ensure the information is current and accurate we do not guarantee its currency and accuracy. You should seek legal or other professional advice before acting or relying on any of the information in this blog as it may not be appropriate for your individual circumstances.