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Complete Business Checklist
Please note: the content in this document are general and some areas may not apply to specific businesses.
Preliminary Matters to Consider
SUITABILITY OF THE PURCHASER FOR THE BUSINESS
- reasons to go into business
- comparison of business with employment
- suitability of purchaser for business
- suitability of purchaser for the particular business
- financial capacity of purchaser for business
ASSESSMENT OF THE BUSINESS
Valuation of goodwill
Assessment of trading record (past, present and projected)
- will the business give fair income?
- will the business return investment in goodwill fixtures and fittings, equipment and stock either by resale or during the economic life of the business?
- will the business give interest on invested capital?
Valuation of fixtures, fittings and equipment
- inspection of premises, fixtures, fittings and equipment
- inspection and valuation of stock
- inspection and valuation of work in progress
- inspection of vendor's tax returns
- inspection of vendor's books of account
- inspection of vendor's wages book
- inter-firm comparisons (statistics on businesses)
- economic life of business, e.g. lease, competitive products, competitive businesses, etc.
- special factors which contribute to success of business, e.g. popularity of proprietor
- techniques or skills of proprietor, location, etc.
Other possible considerations
- competitive businesses existing or proposed?
- competitive products existing or proposed?
- reliability of future trading?
- reasons for vendor selling business?
- inspect current licenses, permits, business name
- authority of vendor to sell business registration certificate, patents, copyright, trademarks, etc.
- inspection of contracts for current or future work with customers
- terms and conditions of contract
Occupancy of premises
- check authorities as to permitted use
Leases - check most relevant clauses
- rights of assignment
- term of lease
- options for renewal
- rent reviews
- permitted use
- convenient to repair
- responsibility for
- any previous defaults
Personal details of vendor(s)
- full name
- address - owned or rented?
- if vendor is a Company, perform a Company search
Advice on finance
- sources of finance
- best source of finance for the business, e.g. overdraft, hire purchase, lease, fully drawn account, interest-only
Contract of Sale
- contract is prepared by the vendor's legal representative
- vendor is to be advised of the clauses the purchaser requires to be in contract
- proposed contract to be discussed with your legal representative who is instructed to check or draft wording suitable to the purchaser's requirements
- relevant clauses include:
- payment of the price
- Cash and terms: preliminary deposit, full deposit, installments, interest, balance
- options: option clause, full deposit and low balance is paid (cash or terms)
- apportionment of price between goodwill, fixtures, fittings and chattels
- implications of government taxes, depreciation, stamp duty, etc.
- right of assignment of lease and conditions thereof (copy of lease should already be annexed to the contract)
- maximum value of stock transferred
- warranty that vendor owns stock
- nobody has claim against stock
- method of valuation
- work in progress, assessment and valuation
- fixtures, fittings and equipment which vendor owns and warranty that nobody has interest therein
- fixtures, fittings and equipment which are leased by vendor
- right of assignment of leased fixtures, fittings and equipment
- list of books to be assigned
- adjustment of outgoings and statutory charges under the lease
- restraint of trade clause, check:
- dealings with previous customers
- engaged in similar business
- transfer of business name, copyright, trademarks, patents
- transfer of phone service
- vendor to supply information:
- list of customers
- know-how, skill and knowledge
- list of suppliers
- vendor required to work in business for a changeover period of time?
Formal searches after execution of contract
- search business name
- title search of premises
- shopping centre outgoings, e.g. cleaning accounts, and etc.
- Land Department
- local authority (municipal council or shire)
- water supply authority
- local sewerage authority
- trademarks, designs, copyrights and patents
- government departments - other relevant licenses, registrations and permits
Before execution of contract
- vendor to show documents (as noted above under preliminary matters)
- vendor to supply
- contract of sale
- copy of lease
- purchaser/landlord prepares proposed assignment of lease
- purchaser obtains title search - if applicable
- purchaser obtains search of business name and/or company name
- vendor to supply signed contract
- purchaser to return signed copy of contract to vendor
- purchaser to pay preliminary or full deposit
- vendor to supply receipt for deposit
After execution but before settlement
- application for certificates from authorities (see list of formal searches above)
- purchaser prepares and supplies to vendor
- assignment of lease
- transfer of registration of business name, trademark, copyright, patents, etc.
- consent to transfer phone services
Immediately prior to settlement
- purchaser prepares adjustment statement - outgoings
The vendor supplies:
- executed assignment of lease
- lessor's part of lease;
- signed consent to transfer of phone service
- signed transfer of business name, trademarks, patents and copyrights
- finance companies' consent to transfer fixtures, fittings and equipment on lease or Hire Purchase lease
- documentation re fixtures, fittings and equipment
- permits, licences and certificates
- keys to premises
The purchaser supplies
- balance of purchase price/first instalment
- adjustment statement
Immediately after settlement
- applies for transfer of phone
- lodges application for transfer of registration of business name, copyright, trademarks, patents, etc.
- pays stamp duty on assignment of lease
- applies for all necessary permits, licenses, registrations and certificates which are personal to proprietor