How a commercial lawyer can help people buying a business on Auckland’s North Shore
Buying a business is a complex matter and one which can take a number of months to complete.
There are a lot of different activities that need to be borne in mind before you become the legal owner. This article will be a short review of some of those; it is not legal advice so please consult a commercial lawyer on the North Shore before you commit to anything.
Firstly, there are two finance aspects to address – the funding of the purchase and more importantly, the due diligence to make sure you are buying a business at a fair price.
Funding the purchase
Clearly any buyer of a business must have suitable funds available for settlement date of the transaction. Without sufficient finance the deal will not go through.
This will often cost the potential purchase the loss of any deposit, significant legal and financing fees for work done to that date. It will also cause significant damage to your reputation.
That said, there are many ways to fund a business purchase. Using your own cash is one but that is often not a good use of your assets. You can raise finance using other assets as collateral. This is very common with a family home typically used as the collateral. This obviously has some risks for your family in case anything goes wrong with the business.
Another method is to use vendor-financing where the seller agrees stepped payments which you can fund from cash-flow in the business.
Whatever, arraignment you agree with the vendor, you must have it clearly recorded as part of the legal sale transfer. Your commercial lawyer will put this in place for you.
Your accountant will conduct the financial due diligence which verifies that the accounts are correct, that taxes are up-to-date and a range of other financial measures are correct.
A commercial lawyer will check that the vendor is legally able to sell the business, that they are the true owner.
Contracts for buying a business
For the sale of most small businesses in New Zealand, the standard real estate Sale and Purchase agreement is used. This means there are no nasty clauses in the main body of the contract plus it saves you money on having the contract drawn up.
However, you or the vendor will be at liberty to add other clauses which your commercial lawyer deems appropriate. A good North Shore commercial lawyer on the will advise adding these clauses dependent upon the type of business you are buying.
This can include a verified stock valuation, a list of goods and chattels plus details of any machinery you are buying.
Other tasks a commercial lawyer will perform
For many businesses leases may be involved. These can be for premises, vehicles and large pieces of plant or machinery. All of those leases will need to be formally transferred to you as the new owner of the business. Your lawyer will verify that the leases are correct and that you understand your commitments b agreeing to them.
Sometimes they may be able to renegotiate parts of your leases. This is quite common for leases for business premises.
This is a brief overview of a few of the major issues if you are considering buying a business on the North Shore. Commercial lawyers will be able to help you understand these issues as they affect you directly. And they will also be able to carry-out those transactions for you. So be sure to contact a commercial lawyer as soon as possible and definitely before you sign any documents.