Business is hard to define but generally speaking, a business is a collection of properties and rights that are used in the course of commerce and in the conduct of an enterprise. One or more of the following assets or rights can form a business:

Goodwill

Goodwill is what makes a business more than just a number of properties. Goodwill is the force that attracts customers and creates profit. Restraints of trade clauses are generally considered to protect the goodwill of a business.

Plant and Equipment

Most businesses need plant and equipment to operate. When selling a business, plants and equipment are supplied by transferring the title or by transferring vendor’s right to use them such as by assigning chattel lease agreements to the purchaser of the business. 

Business Premises

Some businesses require a premise to operate, cafes, restaurants and retail shops are some examples. A business can own its premises or operate on leased premises.

Staff

Employees are an important part of a business. Obviously, the business does not own staff, but different employment contracts regulate the relationship of any employee with the business.

Contracts

For some businesses, contracts with suppliers, customers and others are crucial to the business and relevant when selling the business.

Stock

Depending on the business, stock can be a substantial element of the business.

Work in Progress (WIP)

Some businesses such as legal or accounting firms or marketing agencies can have a substantial amount in WIP as unbilled hours of work.

Intellectual Property

Patents, trademarks, and copyrights are examples of IP and can be highly important for a business. Transfer of IP such as Copyrights, websites, domain, logo can present unique challenges when selling businesses.

Each of these items will have different tax consequences so it is important to identify each item carefully when buying or selling a business. For example, goodwill cannot be depreciated for tax purposes while plant and equipment can.

This short article does not constitute legal advice and should not be relied as such. For legal advice contact us on 02 8014 5818 or info@checkslaw.com.au