As property lawyers, we spend a great deal of time considering questions of ownership, title and interest. When buying a business from someone, you may not be buying any particular thing, such as shares in a company, or title to a house.
When buying a business, you are instead purchasing a ‘bundle of rights’ from the current business-owner.
Some of the things that make up a business are property, such as equipment, stock, money left over in accounts and maybe even a lease or title to a shop. Other rights are more intangible: intellectual property, goodwill, debts, and business names.
Because there is no single piece of property, it is important to make sure that when you buy a business, the contract covers all of the rights and property associated with that business.
It is no good buying a café if you don’t have the right to use its name and reputation or buying a car repair shop if you don’t have the right to chase after debts owing from before you took over.
If the business is a franchise, it is even more important to ensure that you are allowed by the franchisor to continue using their brand in accordance with the franchise agreement, and it is important that you understand and view the terms of that agreement before buying the business.
You should also remember that in some jurisdictions, buying a business does not require a formal contract, and even a string of emails could mean you are contractually obligated to go through with the purchase.
If you are unsure, seek legal advice before entering formal negotiations.