Breach Of Turnover Warranty and Other Things You Need To Know When Buying A Business
Acquiring a new business is quite exciting to entrepreneurs. However, when you are buying a pre-existing business, the rules change a little bit, and you have to be even more careful than when you are setting up the business for yourself. Here are a few tips that will guide you to avoid the common pitfalls that many people face.
Knowing Exactly What You Are Buying
Well, it is obvious that if you are interested in investing in a restaurant, you will approach people that are selling already established restaurants. However, seeing the building and the workers and customer does not mean that you understand exactly what you are purchasing. You need to take time and have the business assets assessed by a professional. This will help you figure out whether the business is profitable or not. In addition, it will help you avoid the mistakes of paying more than what the business is actually worth. Make sure that besides the assets, the intellectual property and systems that support the business are legal and successful.
The Importance Of Due Diligence
You as the buyer need to learn that the seller will be presenting the prettiest face of the business because they are marketing it. As wrong as it sounds, it is your job as the buyer to dig up the dirt. There are a few steps you can take to learn the business in a deeper manner.
- Contact the suppliers to the business, take time and ask them what they think about the business in general. Ask them whether they foresee a bright future for the establishment. Listen to what they have to say about the profitability of the business and whether it is a good idea to invest in it.
- Legal diligence: every year, lots of people find themselves in complicated legal situations when they acquire businesses that have not been operating in full compliance with the laws of the New Zealand. Make sure that the business assets are really owned by the people selling the business. Also, ensure that the owners comply with tax laws and other legal business requirements.
Breach Of Turnover Warranty
So, let us imagine that you have spotted a great business you would like to buy, you have done your due diligence, and you have approached the owners. Fortunately, they were also looking for a buyer, and they engage you in the sale process.
One of the first steps is to arrange for a turnover warranty. This document confirms that the sales or turnover figures in the sale agreement are accurate. The turnover warranty should stipulate whether GST is included or not. You can then ask your accountant to look through the books and verify the turnover figures are accurate. However, you may find after the fact, that the turnover was not as claimed. Perhaps there was a significant one-off transaction which inflated the figures. The seller might be in breach of the warranty and signed contract, so what do you do?
The best step is to talk to your lawyer. For Auckland lawyers, dealing with disputes is one of the main areas of work including breach of turnover warranty or falsifying sales figures. A good dispute lawyer will have worked on similar cases and will be able to advise you on your options. Each case will be different so you cannot simply assume that you have a good case.
If you have purchased for which you feel there was a breach of turnover warranty, a well-respected dispute lawyer in Auckland is McVeagh Fleming. They have offices in the CBD and also in Albany. You can get more information about them from their website www.mcveaghfleming.co.nz/.