Please guide me Steps of buying an existing Business!

[Llama]

This is my first time buying an existing running business. I never had any business before. I know the Seller for about 2 years, we both go to same gym. He mentioned, he wants to sell his business and i showed interest. We have gone through numbers and i'm ready to buy it.
He mentioned, he will add me as director in his ltd company and remove himself also he will add my name to business bank account as signatory and will remove himself. I will pay him the amount agreed to buy the business and thats it .. He will also give me access to his social media page.
my questions is , is that all it needs to buy a business ? i mean shouldn't it be some paper work we both need to sign or something? i mean this is my first time and could you please guide me the steps involved as do not want to make mistakes and error. Thanks

 

[japancool]

I never had any business before.

Alarm bells ringing right here.

 

[Llama]

Alarm bells ringing right here.

What you mean ?

 

[Ozzy]

There is simply just too much to list of what you need to consider when buying a company. Sorry to be blunt but you seem very green to this that I’d urge you to get a solicitor experienced in M&A (Mergers & Acquisition) involved before you do a single thing more.
Buying a business is a huge amount more than simply being added as a director, bank signatory and the social media. You will want warranties to protect you from tax investigations, possible claims for negligence and a huge lot more.

 

[Llama]

There is simply just too much to list of what you need to consider when buying a company. Sorry to be blunt but you seem very green to this that I’d urge you to get a solicitor experienced in M&A (Mergers & Acquisition) involved before you do a single thing more.
Buying a business is a huge amount more than simply being added as a director, bank signatory and the social media. You will want warranties to protect you from tax investigations, possible claims for negligence and a huge lot more.

Thanks Ozzy, Its not a very big business. Hes a plumber and his ltd company got good 400+ reviews online. I'm also a plumber but work for someone else. We agreed at 20k for sale of this business. In return, i will take over the brand, his online access where he get jobs etc. I thought i will be a simple process to take over the business coz involving M&A solicitor could cost lot of money isnt ? Thanks

 

[Ozzy]

Yes a solicitor will cost a few thousand, but imagine if a boiler he fitted had a problem and caused a fire. Without the right purchase contracts done you will find yourself liable for the compensation claim not him. Or worse, someone is injured or dies and you get taken to court as the new business owner. He as the previously owner will have zero liability what so ever of you simply just buy it on a handshake.
Several thousand in good legal advice now could save you possibly hundreds of thousands if not bankruptcy later.

 

[Llama]

Yes a solicitor will cost a few thousand, but imagine if a boiler he fitted had a problem and caused a fire. Without the right purchase contracts done you will find yourself liable for the compensation claim not him. Or worse, someone is injured or dies and you get taken to court as the new business owner. He as the previously owner will have zero liability what so ever of you simply just buy it on a handshake.
Several thousand in good legal advice now could save you possibly hundreds of thousands if not bankruptcy later.

Thanks Ozzy, that is really a great advice. I didn't think it that way. Sure i will look online for some M&A solicitors. May i ask you once i have a solicitor agreement agreed and signed by both parties. then the process i mentioned above is the same then to take over the business please? Meaning changing directorship and access to business account ? Just want to know what will be steps involved . thanks

 

[Ozzy]

The solicitor will put together an SPA (Share/Sale Purchase Agreement) which will involve transferring the shares of the company to you.
You may also need to notify HMRC, but ultimately the solicitor will handle it all for you. Also informing suppliers and ensuring now guarantees need sorting.

 

[Llama]

The solicitor will put together an SPA (Share/Sale Purchase Agreement) which will involve transferring the shares of the company to you.
You may also need to notify HMRC, but ultimately the solicitor will handle it all for you. Also informing suppliers and ensuring now guarantees need sorting.

Thanks for replying. Really appreciate it.

 

[The Byre]

1. What Ozzy said.
2. A wealth of info here - http://ukbusinessbrokers.com/gallery/
3. £20k sounds like a reasonable sum for a one-man-band operation.

 

[pentel]

He mentioned, he will add me as director in his ltd company and remove himself also he will add my name to business bank account as signatory and will remove himself. I will pay him the amount agreed to buy the business and thats it .. He will also give me access to his social media page.

You definitely need a solicitor. No mention of transferring shares. Owning all of the shares is owning the business.

There are a lot of steps to go through when buying a business to protect both the buyer and the seller.

As mentioned above you both need independent legal representation to do this right.

However the amount you mentioned could very easily get spent in legal fees.

 

[fisicx]

That 20K is really just buying you his list of contacts.

A website is simple to create as are social profiles. Are you getting all his tools, the van, insurances, certification and so on. Are those reviews transferable?

 

[Socio South West]

If you take over the existing company in the manner described, as others have said, you take over all his potential liabilities, warranties and more.
If you set up a new company, and then just purchase the assets and goodwill you are effectively only going to have your own messes to sort out, and not his. The assets can include the trading style, so outwardly it appears to be exactly the same business.
However, in doing this be sure to include some form of restriction on him starting up again in competition to you within a certain time frame in the agreement.

Very good advice to spend a few quid on advice and opening your eyes to potential pitfalls - and find out exactly what you are getting for your £20k.

 

[Llama]

Thanks all, I think i just jumped into without thinking much of consequences. I Also thought 20K i reasonable. I did contacted couple of solicitors and they charging too much. So we decided not to proceed with this ..