Complete Business Checklist

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

  • 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
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
  • price
Occupancy of premises
  • check authorities as to permitted use
Leases - check most relevant clauses
  • rent
  • rights of assignment
  • term of lease
  • options for renewal
  • enforceability
  • rent reviews
  • permitted use
  • convenient to repair
  • responsibility for
  • outgoings
  • any previous defaults
  • insurance
  • subletting
Personal details of vendor(s)
  • full name
  • address - owned or rented?
  • bank
  • references
  • if vendor is a Company, perform a Company search
Advice on finance
  • security
  • 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)
                     - stock:
                              - 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
At execution
  • 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
At settlement
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
The Purchaser:
  • 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