shutterstock 654147549

Great, You Have Found a New Business, Now How to Buy It?

Looking to purchase a business? We can help!

There are a number of steps involved in buying a business, and working your way through them can seem quite overwhelming, particularly
for first time buyers.

Often prospective purchasers overlook important aspects and end up having to sort out issues that arise after settlement – at significant cost. This article puts the spotlight on common snags people experience when buying a new business.

Choosing a business structure

It’s important that you select the business structure to suit your personal circumstances and business aims. There are four main types of business structures, each with pros and cons:

  1. Sole trader
  2. Partnership
  3. Company, and 
  4. Trading trust.

We can assist you to select the structure which offers suitable protections and bears the appropriate level of risk. Further, we can advise you of the merits of either buying shares in, or assets of, the business.


Structuring the finance to purchase the business can be as complicated as selecting the business structure itself. You may choose to self-fund by lending the business money, or fund the purchase through a financial institution. We suggest this is explored as part of your due diligence.

What’s in a business?

The tangible assets of a business may include machinery, equipment, furniture, fittings, motor vehicles and other chattels.

The intangible asset of ‘goodwill’, which represents the benefit and advantage of the good name, or reputation, of the business is also incorporated into the purchase price.

Vendors usually estimate the value of the ‘stock in trade’ owned by a business, the actual figure to be ascertained by stocktake on settlement. The Sale and Purchase Agreement should provide for a maximum percentage by which this figure can change, so you can rely on the value of stock being within a specific range.


If the business will continue to be operated when it goes to sale, then it’s sold ‘as a going concern’. Under these circumstances, the Goods and Services Tax Act 1985 allows the transaction to be zero-rated for GST purposes. This means that if both parties are GST registered, then there is no GST to pay.

A prudent purchaser will want to ensure that the tangible assets are valued at the market rate to avoid paying unnecessary tax due to over-inflated values.
You may want to seek tax advice to ensure that you satisfy your obligations to the Inland Revenue.

Ensuring continued profitability

The vendor should provide a ‘turnover warranty’ stating the average weekly turnover for the business. The vendor must disclose any one-off events which have led to spikes in turnover for that period, otherwise this may amount to misrepresentation.

Restraint of trade

A ‘restraint of trade’ allows a purchaser to prevent the vendor from competing against them, post-sale, by running a similar type of business within a specific geographical area and time limit.
Restraint of trade provisions must be reasonable. It’s vital to ensure that any restraint of trade is wide enough to cover directors, shareholders and employees involved with the business whom you wish to prevent competing against you.

Intellectual property

Buyers often forget to purchase intellectual property associated with a business. If there is a website, or any internet or social media content that you are purchasing with the business, you will need to cover this in the Sale and Purchase Agreement.

Leasing arrangements

As many business operate from leased premises, you must ensure that you have the right to occupy the business premises on terms and conditions which are acceptable to you. There may be an existing lease which will need to be assigned to you – in which case you will need the landlord’s consent.

Employment contracts

Employees are a crucial part of a business, and they can have a significant impact on the successful continued operation of that business. If you are buying a business which has current employees, they will technically be made redundant on settlement. We can advise you how to manage the restructuring period, including offering new contracts to the employees whom you wish to retain.

The process of purchasing a business can be time-consuming and confusing. If you are looking at getting into business, we are happy to guide you so that you can focus on the exciting parts of your new venture.


Let's chat

Related Articles
Or go back to overview
Home Buying, Selling & Moving Checklist

These helpful checklists will guide you thought some of the most important areas you and your lawyer need to address when purchasing or selling a residential property and also when moving.

Read More
on the move logo2
On The Move - A Practical Guide For Buying & Selling Your Home

Also includes comprehensive checklists to you don't miss out any important step as well as details on how to protect your assets and when you also need to consider a...

Read More
handing over keys
Australian Guide To Buying Property In NZ

Not all investments in NZ require consent from the Overseas Investment Office (“OIO”) but like many countries NZ has controls on overseas investment. Certain land is subject to OIO consent.

Read More
family trusts4
Family Trust Guide

This practical guide designed to steer you through the essentials of Family Trusts including: Is a family trust for you? Protection given by a Family Trust. Planning for your life. Duties of trustees and how to run a trust. Costs.

Read More
road to glenorchy small2
Guide To Buying Real Estate In New Zealand

Our local knowledge, experience and expertise will provide you with the support and advice you need for a successful property purchase, regardless of the size or complexity of the transaction.

Read More
chinese buyers
Chinese Buyers Guide To Buying Property in NZ

We have produced a practical guide on buying a home or an investment property in New Zealand in Mandarin.

Read More
wills estates2
Estates Booklet - The Closing Chapter

You’re catapulted into thinking about organising a funeral, whether it will be a cremation or burial and how to organise the day, and then you also need to think about...

Read More
Be the First to Know
Something for Nothing

Stay uo to date with our latest News, Views & Resources by subscribing to our newsletter. We promise to provide you with quality content & the latest industry news.