Small Business Checklist

Before purchasing a business you should consider all of the following:

  • Engage an accountant to examine the books and records of the business.
  • Test the financial representations made by the vendor.
  • Check whether the business will be able to service your proposed borrowings and still leave an adequate return.
  • Check the terms and conditions of the contract and discuss them with your solicitor before you sign it. Is there to be a restraint of trade on the vendor? If the vendor is a company, are the directors personally bound?
  • Check the registrations, licences, or permits held by the vendor.
  • Is the business a franchise?  Check the Franchise Agreement and what fees are payable and what consents are needed. You should obtain legal advice.
  • Check the provisions of the lease and obtain legal advice before you sign it. What consents are needed from the lessor? Is there a personal guarantee required?
  • Check the inventory of chattels, plant and equipment and their condition. Are there any encumbrances to be discharged?
  • Check for restrictions as to the use of the business premises.
  • Check the rates, insurance and other outgoings.
  • If employees are to remain in employment, check employment contracts, the method of adjusting salary, annual leave, superannuation, etc. and how this is dealt with in the agreement. 
  • Seek legal and accounting advice about choosing the most appropriate operating structure – this may have taxation implications.
  • Seek legal advice on the laws relating to consumer protection, credit, leases, employment law, patents and copyright.
  • Seek expert taxation advice and be aware of GST, PAYE and FBT.

For further information please contact Stewart Germann before you sign any Agreement for Sale and Purchase.

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Stewart Germann
Stewart Germann

Stewart Germann is a Barrister and Solicitor of the High Court of New Zealand and he attended the University of Auckland. He has the qualifications of B.Com, LLB, FCIS, CFInstD, CFE and Notary Public and he specialises in franchising, licensing, sale and purchase of businesses and commercial law.

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