The small business specialists
Phone: 13 12 49
Buying an established business requires a major commitment of time, money and energy. Doing your research before making a decision is essential.
The process for purchasing a business generally follows these steps:
Advantages of buying an established business include:
Disadvantages of buying an established business include:
What is the ‘right’ business will vary, depending on your particular needs and lifestyle.
Before selecting a business check you:
Businesses for sale are usually advertised in newspapers, industry magazines, and the internet. Your accountant may also be able to assist, while business brokers and commercial real estate agents are also excellent resources. The Business Brokers Association (WA) can assist in finding a broker.
Not all businesses for sale are a good investment. Before buying you need to understand exactly what you are paying for.
You need to:
Due diligence involves undertaking a thorough review of the business to determine the likelihood of its future success.
You will need to obtain the following information:
Reduce the risks in buying a business by making sure all plant and equipment is in good working order, checking the vehicles are licensed, and that there are no interests on the property being sold. You can check this online via the Personal Property and Securities Register.
An independent valuation will confirm that you are paying a fair price. There are three main methods of valuing a business.
If staff will be transferring with the business you need to be aware of your responsibilities. Specific requirements regarding the transfer of a business and employee entitlements will vary according to which industrial relations system the business is covered by.
Unless sold as a going concern, you will need to account for GST on the sale of the business. You also need to ensure all Australian Tax Office (ATO) requirements are met
Speak to an accountant or tax professional to understand your tax obligations or visit the ATO.
Once you decide to purchase the business the next step is to make an offer to the vendor.
There is no standard documentation when buying a business. If you are not using a real estate agent or business broker you are likely to need a lawyer to draw up a legally binding offer and acceptance.
For your own protection make sure all promises and undertakings given by the vendor are confirmed in writing. Your lawyer should include appropriate conditions in the offer. This will allow you to withdraw your offer, without penalty, if the vendor does not meet these conditions.
After you agree on the price and terms of sale you will need to arrange the transfer of licences and registrations. For more information go to our licences and permit section.