In Australia we are famous for the “She’ll be right, mate!” attitude. Unfortunately, when it comes to legal contracts and the exchange of large sums of money if “She ain’t quite right mate!” then it can end up costing someone a lot of money, time and stress. And none of us need any more of that.
An example is the legal entity of the seller’s business and the buyer’s business. It’s one of the first questions I ask people. And they tell me it is, e.g. XYZ Pty Ltd. It gets put on to the paperwork and the owner signs the Authority To Act, for example. In spite of repeated questions it can turn out later, possibly at a critical time, that there are multiple directors and some don’t want to sell. Or, there is a “trust” involved and the Pty Ltd is a trustee for the trust.This can cause all kinds of complications down the track.
Another common mistake is the incorrect spelling of business names. Over a period of time the owner forgets that they registered XYZ (W.A.) Pty Ltd and not just XYZ Pty Ltd or something along those lines. When I pull them up for it they ask “Well isn’t that close enough?” to which I always answer “If you are one digit out dialing a telephone number, does it really matter?”
Of course it matters!!! And then settlement of the deal gets delayed and people get angry and frustrated and start looking for people to blame. No matter how much as brokers we strive to get the correct information and detail, we are usually at the mercy of the owner’s memory (apart from certain things which can be searched on government databases) – which has often faded with time!
TIP: Always check what you are writing on forms BEFORE you fill it in. And the old adage “NEVER ASSUME” – please!
P.S. Check out my upcoming workshops in Perth – next one is March 7th 2012 – CLICK HERE for more details and registration.
“Helping business owners achieve their life goals through buying and selling businesses!”
Today’s tip - put everything through your accounts! Why? Because taking cash out of the business is both illegal and dumb! If your business type attracts a multiplier of say, three times net profit at point of sale - and you take $20,000 cash out of the business (off the profit) - then it costs you $60,000 at point of sale. Dumb! And illegal! And we will not take it in to account. I need a coffee!!!