Buying a small business can be one of the most exciting things you can do, but it’s also not something you should take lightly. Being able to enjoy small business success – particularly if you’re buying one that is already established – is often about investing the right amount of preparation, and a lot of this preparation relates to covering yourself legally. In this article, we take a look at a few key questions you should be asking yourself to ensure that you’re well prepared for your small business endeavour.
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Familiarising yourself with finances
As any good business lawyers in Melbourne will tell you, having a very good understanding of how you’re going to finance your new small business is an important step in covering yourself legally. Most of the time people looking to buy a new business through either equity (sourcing and using your own funds and/or a partner’s funds to secure the business) or with debt (through whatever loans might be relevant). When you’re sourcing this money, it’s crucial that you have a complete understanding of what you’ll need to cover through buying a business. In addition to the cost of buying the business outright from someone else (if applicable), you’ll need to often invest a significant amount of money into store modelling, business registration, staff (which will also require you to consider both training and wage costs), lease arrangements and any new stock you need to purchase from the outset. You may also have existing debts that you need to cover, and not putting these finances off can be very important for the longevity of your business. Enquiring about any existing debts related to the business is also important, as you don’t want to be taking on any further financial obligations than you can handle.
Understanding the structure of the business
Established businesses will already have an existing structure in place, so it’s important to be aware of what this is. For reference, the structure might be related to a sole trader, a partnership, or even a larger company, but whatever it may be, being aware of this structure can help inform your legal rights. This structure can be changed, though, especially if you are entering the business already in a partnership agreement. Understanding the structure of the business is also important due to the tax implications. Although some people fresh to the idea of new business ownership might not be aware, the tax that a business owner can be expected to pay can depend, particularly in relation to both GST and capital gains tax. As you might change the structure, you may also want to change the existing ABN and name of the business. If you decide to keep the name in order to cater to existing customers, you’ll need to consider existing renewal terms of the business name and information with ASIC.
Ready to take on your first business venture?
Success that stems from buying your first business requires a good amount of research and business understanding in order to prevent legal issues from occurring, but understanding these can help you become a better business owner on the whole. If you haven’t got a clue where to start, following up with a business lawyer is often the best thing you can do.