Home – New Forums Starting your journey Purchasing a Business – keep existing ACN?

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  • #991431
    DesertPea
    Member
    • Total posts: 2
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    Hiya,

    Looking at buying a business and the seller has structured through a Pty Ltd. My questions are:
    – Would it be easier to just become a shareholder and then the seller resigns from the company?
    – Do you take on the risk of all previous company history if I use the existing ACN?
    – Would I be protected by the safe harbour laws if I were to be audited?
    – Or am I better off starting a new company and transferring everything over?

    Cheers

    #1181490
    Dave Gillen – Former FS Concierge
    Keymaster
    • Total posts: 2,566
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    Hi DesertPea,

    Welcome to Flying Solo!

    Most of your questions seem to be concerned with protection from the past activities of the company, so I wonder if this is a smart purchase for you… :)

    I don’t know much about this area, but hopefully some others can help. Though if you can provide more context (more details about your situation, and what your specific concerns are) you’ll get advice that is more tailored to your situation.

    Good luck!

    Dave

    #1181491
    NickKaro
    Member
    • Total posts: 226
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    DesertPea, post: 211735 wrote:
    Hiya,

    Looking at buying a business and the seller has structured through a Pty Ltd. My questions are:
    – Would it be easier to just become a shareholder and then the seller resigns from the company?
    – Do you take on the risk of all previous company history if I use the existing ACN?
    – Would I be protected by the safe harbour laws if I were to be audited?
    – Or am I better off starting a new company and transferring everything over?

    Cheers

    Whether you purchase the shares or simply the business/assets will depend on:

    1. The risks of taking on the entity – tax and legal risks carry on if you purchase an entity (although you can obtain warranties and indemnities from the seller to mitigate these risks). Due diligence will need to be undertaken to identify any risks and determine how the warranty regime will operate.

    2. How difficult it will be to transfer assets/contracts/licenses to a new entity.

    You should speak to a lawyer as this can be a complex process – I am happy to assist of course (my contact details in my signature below).

    Regards
    Nick

    #1181492
    PRO
    Member
    • Total posts: 450
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    DesertPea, post: 211735 wrote:
    Hiya,

    Looking at buying a business and the seller has structured through a Pty Ltd. My questions are:
    – Would it be easier to just become a shareholder and then the seller resigns from the company?
    – Do you take on the risk of all previous company history if I use the existing ACN?
    – Would I be protected by the safe harbour laws if I were to be audited?
    – Or am I better off starting a new company and transferring everything over?

    Cheers

    Typically with small businesses you setup a new entity and purchase the business from the old one. You can just buy the shares and then become the director but it is a question of cost vs risk.

    #1181493
    James Millar
    Participant
    • Total posts: 1,739
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    Small business land tends to be an asset acquisition dumped into a new entity rather than a share equity acquisition of the existing company that holds the business. Medium to large business and things are different.

    It is definitely a risk issue.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1181494
    DesertPea
    Member
    • Total posts: 2
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    Thanks everyone for the advice. The questions arise from my accountant who made the blanket suggestion not to continue the company due me being liable for anything the current director may have done. After reviewing all the financials I don’t believe there is anything untoward being done. Maybe some incorrectly categorised expenses but that’s about it.
    I guess I’m indeed trying to weigh up risk vs costs here. There are a number of expenses such as international and Australian trademarks that need to be transferred. Insurances of course will also need to be re-applied. But I guess at the core of it, a few thousand dollars maybe a lot cheaper than any scrutiny that may or may not occur from the ATO or lawsuit. I’m probably just making a mountain out of a mole hill!

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