Much is involved in the taking over of a business. The purchase of its goodwill and assets includes the purchase or taking over of the premises from which it trades (if it has physical premises).
The ‘deal’ is usually best looked at as two transactions running side by side. Firstly, there is the sale or purchase of the goodwill and other assets (such as the equipment or ‘tools of the trade’) of the business – this is by way of a Business Asset Sale (or Purchase) Agreement (or Contract). Secondly, the trading premises must be dealt with, either by sale and purchase (if the seller owns them outright), by transfer (or assignment) of the seller’s existing lease, or by the taking of a new lease from the landlord.
The necessary work depends on the situation surrounding the business premises – for example, whether these are owned or rented by the seller, and in the latter case, if there is a lease to be assigned or a new lease granted. This is, however, invariably the aspect of the transaction which takes up the most time and is the most complex.
VAT will not normally be relevant to the price paid for the business assets where both parties are VAT registered and where the transaction will usually qualify for ‘TOGC’ status (Transfer of a Going Concern). If there is a lease to be transferred or granted, however, it may be the case that the rents under that will carry VAT and this should be clarified with the landlord early on. Advice on tax implications should be taken as a matter of course at the outset by anyone considering any kind of business purchase.
The price paid for any stock will usually be agreed between the parties directly at the time or immediately before the time of the transfer of the business. However, this depends on the value and nature of any stock and this in turn depends on the nature of the relevant business.
In a nutshell, there is much more involved in a transaction of this kind than most people are aware of and expert advice should be sought at an early stage and throughout the process.
For more information on any of the above issues, call our Business Support team on 0113 201 4900 or email firstname.lastname@example.org for a free, initial consultation.
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