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QLD Commercial Law - Queries on Purchasing a Small Business

Discussion in 'Commercial Law Forum' started by Bradcoll, 4 October 2015.

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  1. Bradcoll

    Bradcoll Member

    4 October 2015
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    I am considering purchasing a fruit shop. Although I have many years of experience operating in the fresh produce industry I have no idea about the purchase of a business, trading names and continuing the employment of current staff.

    Below is an outline of how I am currently looking to achieve the transfer and am hoping I can get some direction and or confirmation if I'm completely going about it the wrong way or what I'm thinking is OK to pursue further.

    I have yet to negotiate a price; this will be done early next week. The offer will be to pay for the equipment and to simply take over the commercial lease. I know this business is not making Money and the owner is keen to get out of it. He currently employs 2 staff in which I would like to initially retain.

    I do not want to take on the old trading name but simply trade under my own name with an ABN that I currently hold. Can I use my own business name without having to register it?

    Having changed the name and simply making a contract with the current owner to purchase his cool rooms, fridges, tills, etc., does this exclude me for any current liabilities that he may have? i..e being sued, bad debts etc.?

    The commercial lease he would just transfer to me after the agreement from the centre management.

    So basically I'm not buying his goodwill or business, just the stock and equipment (this is all unencumbered)

    With the current staff I would like to approach this in terms of saying I won't be keeping you on as an employee but you may apply for your job and you will most likely get it, have them sign a new employment contract and new terms of employment.

    Is there anything else I should consider?

    Am I acting legally under Commercial Law in the manner I want to go about it?

    Thank you for your help.
  2. Rod

    Rod Well-Known Member

    27 May 2014
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    There are a few things you need to put into the contract to protect yourself. You may need help here, an experienced business owner may be sufficient if you know someone. You don't necessarily need a lawyer.

    Also you need to look carefully at the shop lease. Can you afford to pay for 'x' years of losses if things don't work? You need to look hard at why he is making losses and why you think you won't. Shopping Centre landlords/agents are notoriously difficult to negotiate with.
  3. Sophea

    Sophea Well-Known Member

    16 April 2014
    Likes Received:
    Hi Bradcoll,

    Regarding what you have said about employees:
    make sure you are aware of your obligations under the Fair Work laws etc as regards business transfers. When businesses change hands - Fact sheets - Fair Work Ombudsman

    It's correct that if you are trading under your own name, then you do not need to register a business name.

    As regards debts and liabilities, yes you would need to ensure the contract is worded to make it clear that you are not purchasing hte business so much as simply the equipment and fit out and that the former owner will indemnify you for any liabilities that arise in connection with the former business.

    Also make sure of course he has title to sell the equipment and that its not security for business loan or anything.

    I would get the assistance of a solicitor.
    Bradcoll likes this.
  4. Bradcoll

    Bradcoll Member

    4 October 2015
    Likes Received:
    Hi Rod and Sophea,

    Thank you for your time to answer my questions.

    From what you have said I feel I'm not too far from being able to go about this the way I have described.

    I am confident the business has potential due to 2 main reasons

    1. It's currently being run quite poorly and the owner is never there.
    2. The previous owner was doing over double of its current turnover.

    I also have many years experience in retailing/wholesaling and the growing sectors of the fresh fruit industry, and I'm currently in a position where the former owner was purchasing from me and then the current owner so I can see the differences in how they operate and can compare the volume of purchases each made.

    I am trying to avoid solicitors mainly due to the low purchase price $25k. Also it should not be that complicated to just make a purchase of items from somebody. Approximately how much would a solicitor charge for what I'm trying to achieve?

    My main concerns now are simply to eliminate the risk from any liabilities of the current owner either current or in the works, as well as if there is any hold over the equipment.

    Where can I find out if there is any hold over of the assets?

    I have a template for purchase of assets. It has a clause that stipulates the equipment has no security for loans, etc., would this be sufficient ? (As below)

    I am also thinking of adding another paragraph about pending or current legal action, but my concern is that, if I'm simply buying the fittings and not the business, then how could I be liable for anything that's happened previously? So to highlight this in the purchase agreement could be a way of admitting there can be liability.

    In terms of staff, I'm now thinking I would not retain their employment as I would operate the store mainly, however will need someone for approximately 4 hours a day, I guess I can discuss this with the current employee and make a decision that works best. To avoid complications, the best way appears to be to end their employment and rehire someone else for the reduced amount of hours.


    Sale Agreement

    AGREEMENT made by and between (Seller),

    and (Buyer).

    For good consideration it is agreed between the parties that:

    1. Seller agrees to sell, and Buyer agrees to buy the
    following described property:

    (insert property description)

    2. Buyer agrees to pay to Seller the total purchase price
    of $<insert amount> ; payable as follows:

    $ <insert amount> deposit herewith
    $ <insert amount> balance by cash or bank cheque at time of transfer

    3. Seller warrants it has full legal title to said property, authority to sell same, and that said property shall be sold free and clear of all liens, encumbrances and claims.

    4. Said property is sold in "as is" condition, Seller disclaiming any warranty of merchantability or working order or condition of the property except that it shall be sold in its present condition.

    5. The parties agree to transfer title on <insert date> , 20 , at the address of the Seller.

    6. This agreement shall be binding and inure to the benefit of the parties, their successors, assigns and personal representative

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