Speak to a Commercial Conveyancing Lawyer when buying a business
Selling or buying a business is a complex transaction requiring a good understanding of most aspects of commercial and property law.
The law not only defines the type of business you can run, it also outlines what you’re allowed to do with the property you buy as well as any lease or licence obligations you take on.
Jim Parke, an accredited business law specialist with conveyancing.com says research is the key.
“If you don’t carefully research the business you’re buying and thoroughly review the Sales Contract, you could end up dealing with legal and financial risks and liabilities left behind by the previous owners,” he said.
“These are almost always time-consuming, and can be complex and very costly.”
Before entering a long-term commitment, you should firstly consult a commercial conveyancing lawyer with experience in business purchases.
Commercial Conveyancing Lawyers
Not only are commercial conveyancing lawyers experts in residential property sales, they also regularly deal with business and commercial property sales. When purchasing a business, conveyancing lawyers can help you through each step of the sales process and ensure you are ready for business on settlement day.
Commercial conveyancing lawyers offer a range of legal services for purchasing small to large businesses across a wide range of industries. When buying an existing business they can:
- Prepare and submit the necessary documents;
- Analyse the history of the business, conduct due diligence and discover any ongoing liabilities;
- Review and negotiate the Sales Contract and related agreements;
- Choose the most suitable business structure (sole trader, partnership, company, etc) though which to acquire and conduct the business;
- Understand what permits and licences you need and obtain or transfer them for you; and
- Reduce your tax liability
What’s Behind the Business?
When purchasing an existing business you are inheriting more than just the company. You are also securing its loyal customers, financial successes and downfalls, partnerships, branding, suppliers and the legacy established by its original founders or the vendors. Therefore, it is vital that you gather as much information about the business as you can. Your conveyancer can collect some of this information for you, but it’s just as worthwhile doing your own research and meeting the business owners in person.
Some useful questions to ask when approaching a business include:
- Why are they selling the business?
- What are their sales trends and patterns?
- How much money is the business earning?
- What are the intellectual property and leasing agreements?
- What has or has not worked for the business in the past?
- Who are the current suppliers?
- How old is the current plant equipment, supplies and technology that helps the business run?
- How do regulations and planning schemes affect the potential growth of the commercial premises?
Jim Parke says many people make the mistake of buying businesses without seeking the necessary advice.
“People often seek professional help when it is already too late. The cost of trying to fix a problem or resolve a dispute down the track can be 20 times that of good advice before entering into the transaction.
“Succeeding in business doesn’t mean you have to do everything yourself. Sometimes it is about finding the right lawyer, accountant, financial planner or conveyancer to provide specialised services, freeing you up to run your business,” he says.
Reviewing the Sales Contract
Before agreement is reached on a price and other purchase terms, a lawyer should review the draft Sales Contract and other documents before signing. Don’t try to review the agreement on your own as business contracts are complicated and it can be easy to miss crucial details hiding under layers of legal jargon. As Sales Contracts are written by legal experts, it is not uncommon for business owners to try to hide key liabilities in the hope that you won’t notice.
Mr Parke says, “Just as most people don’t spend days designing their own websites when a few well spent dollars can have it done twice as well in half the time, why would anyone try to conduct their own business purchase when the risks and complexity are much greater?”
Having a commercial conveyancing lawyer review the agreement means they can pick up on these small details and negotiate a better deal on your behalf or advise you to walk away from the deal completely.
Commercial Property Sales
Buying commercial property is very different to residential purchases. If you plan to transfer the rights of a commercial property into your name, you will need guidance from someone who understands the specific needs of the industry. As well as getting professional advice and support on the purchase, you can expect all the services a commercial conveyancer offers. Commercial conveyancing lawyers can guide you through the buying process and prepare all the necessary documentation needed for settlement day.
Some of the additional services a commercial conveyancing lawyer can provide include:
- Certificate of title, utility, duty, tax and other searches;
- Reviewing the Sales Contract;
- Arranging settlement date;
- Advice on covenants and restrictions;
- Certifying and submitting documents;
- Liaising with financial lenders;
- Checking that everything is in place for settlement;
- Attending to the timely transfers or applications for permits and licences where needed; and
- Attending settlement to ensure everything runs smoothly on the day.
Two types of commercial leases
There are two types of commercial lease that usually apply to premises such as industrial warehouses, sites or offices. Retail Commercial Leases are used for real estate leases where goods and services are being or will be sold on the premises. Non-Retail Commercial Leases are used where the premises will not be used to sell goods or services but business will still be conducted there.
How can a commercial conveyancing lawyer help?
Due to the added complexities of a commercial lease, enlisting a commercial conveyancing lawyer is the best way help navigate these difficult agreements. They will help you with the following elements of the negotiation process:
- Help you understand each clause within the Commercial Lease and related documents, such as guarantees and licences, and take your instructions on negotiating terms.
- Negotiate with the tenant, their solicitors or the owner as needed on any part of your Commercial Lease.
- Help you understand your obligations and requirements under the lease, including insurance, make-good obligations and any refurbishment or other contributions.
- Once your Commercial Lease is finalised, they will help you execute the lease agreement. They may also be involved with stamp duty obligations if relevant.
- Respond to any follow-up correspondence with the tenant or owner after the Commercial Lease has been executed.
By working with a commercial conveyancing lawyer, you ensure your commercial property is free of any debts, caveats and other unforeseen obstacles that may interfere with its value and the operation of your business.