• Price – What price are you wanting to offer?
  • What is the price made up of? The purchase of the tangible fixed assets provides you as the purchaser with the ability to depreciate those assets going forward to give you tax deductions, but the purchase of most intangible assets, especially good will does not provide you with any future tax benefit. The value of any stock which you are purchasing is also important because this provides you with the base cost from which the taxable profit you make on the sale of that initial stock will be calculated. Therefore, you can see that the higher the value you place on the tangible assets and the stock, the better the starting position for you from a tax perspective.
  • GST – Is the price GST inclusive or exclusive?
  • Settlement Date – What date is suitable for you to take over the business? Make sure you give yourself sufficient time to work through all the conditions and organise all the business structuring and set-up you need to prepare for prior to going live as the new business owner.
  • Lease – Is the business dependent on a lease of premises for which the landlord will need to consent to you taking over?
  • Turnover Warranty – Has the vendor provided you with financial information or marketed the property with reference to actual sales figures? If so, by including a turnover warranty that reflects those representations, you have a mechanism to attempt to obtain compensation if those representations turn out to have been misleading.
  • Minimum Stock Percentage – If you are concerned that the value of the stock may need more accurate calculation by way of a formal stock take and you want to have some control over what stock you end up purchasing if there are discrepancies, then include details in the minimum stock percentage area of the agreement.
  • Restraint of Trade – Do you want to restrict the vendor from opening a new business in direct competition to you after they have sold? If so, you need to make sure there are details included in the restraint of trade section of the agreement, and that the actual restraint document is prepared if the structure of the vendor so requires.
  • Vendor Assistance – Do you want the vendor to provide you with assistance in the business after you have bought? If so you should indicate this in the agreement and probably detail the specific assistance that you are expecting from them.
  • Finance – It is imperative that you have a finance condition noted if you are requiring bank confirmation that they will provide you with the level of borrowing you may need to purchase the business.
  • Due Diligence – It is wise to include a due diligence clause in the agreement to allow you to investigate a number of different things before you completely commit to purchasing. It is wise that this includes details of all the information you expect the vendor to provide, and a time frame within which they have to provide it.
  • Employees – Are there critical employees who you need to retain to enable the business to continue in a smooth way? If so, your contract should cover off a requirement that you have negotiated the contracts you want with such employees before going unconditional.
  • Suppliers – Are there any critical supply agreements that you need to take over from the vendor? The negotiation of these critical agreements should form part of the conditions in your agreement.