What Are the Legal Issues of Buying a Business?
Building a solid business can take a considerable amount of time, so buying a business is often a better route to take. When you make the proper choices, you can end up with a business that is already profitable and one that will work well for you for many years to come. You need to be careful, however, because there may also be some legal issues that are involved with purchasing a business as well. This article, we will consider some of those issues when you are going to buy a North Shore business and what you can do to avoid them when possible.
Compliance – One important matter that is often overlooked by many small business owners is having the proper permits and being in compliance with the law and local Auckland by-laws. This is of particular concern if you are purchasing a business and you will be taking over their physical location. At times, it may be necessary for you to have special permits in order to operate the business or you may need to adjust those permits when you obtain it. In addition, you need to be concerned about the area where the business is operating and the possibility that it may be selling in other states or perhaps even internationally.
Entity – When you purchase a business, you will also be purchasing the entity that you specify. However, different entities bring different obligations. For example, a limited liability company while giving you some protection, requires you to lodge specific documents and records with the government by certain dates. On the other hand, a purchase by you a as private individual is less demanding from a compliance perspective but has greater risks. And many people like to use a Family Trust to buy a business but that has many legal constraints that people hope to ignore but will prove costly if they do. So seek legal advice about the purchasing entity and how you propose to the transfer of the corporate ownership to your control. That is why you need to be very cautious that the business has everything set up properly, that all of the documents are in good order and have been verified by your commercial lawyer.
Another factor that needs to be considered with the entity of the business is if there are any shareholders or if there is a third party that is involved with the business. At times, a shareholder may have certain rights, including the right of first refusal, and you would need to know about that factor in advance.
Assets – In many cases, you’re not only going to be purchasing the business name, you are also going to be purchasing the assets of the business as well. You need to do your due diligence and to look behind the scenes to see if there are any liens associated with those assets before you make the purchase. If there are liens, they may fall on your shoulders so you would need to have them cleared up in advance of making your purchase.
Customer Information – The transfer of the business would often also include the transfer of existing customers and customer information. This can be a real benefit to you, because it allows you to operate the business without interruption. It is important to be cautious about any privacy laws that may impede the transfer of customer information to you. The violation of such laws could quickly bring your new business to a halt.
Contracts – Review all of the contracts associated with the business before they are transferred to you. In some cases, a change in ownership of the business would terminate the contract, making it necessary for you to form new relationships with those or similar companies. Although the contracts may simply transfer to the new owner, there may be times that they do not, and it can cause real problems.
As you can tell, there are many things to consider when you look to buy a North Shore business. It would be to your benefit to hire a lawyer that has experience in helping people to buy a North Shore business and would be able to assist you in making sure that everything is ready for the transfer and can be transferred successfully. Not only can it provide you with peace of mind, having a qualified lawyer help you in this matter can help to make your new business a success.