Sale of business vs company sale

Posted on May 19th, 2017

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In this article we will look at the differences between the sale of a business and the sale of a company including a few of the pros and cons for each. 

Firstly, there is a significant difference between the sale of a business and the sale of a company. A business is an enterprise usually engaged in to generate revenue (i.e. the business of selling food or the business of providing accounting services).  It is possible for a business to be operated/owned by a number of different entities (such as individuals, companies or trusts). When a business is sold, it is sold from one entity (the owner) to another entity (the purchaser). Usually the sale of the business will consist of the transfer of assets, goodwill, intellectual property, licences, business name, plant and equipment. 

A sale of a company is different in that it is actually a sale of the shares within the company itself (i.e. the sale of the underlying ownership in the company). It is often the case that a business enterprise will be conducted by a company and the sale of the company will include an acquisition of the business enterprise operated by the company. One of the advantages for a purchaser in purchasing a company as opposed to the purchasing of the business it that there is usually no need to arrange for assets, licences, business names, intellectual property etc. to be transferred as they remain with the company.

However, there is also a significant risk in purchasing a company rather than simply purchasing a business in that when you purchase a company you will usually inherit all the existing liability in the company (i.e. creditors, existing legal claims and tax liabilities).

Whether you choose to purchase a business or the underlying company will be dependent on the individual circumstances, however, it is important to note that there is significant differences between the two options.

 

Lachlan Page, Solicitor at Mullane & Lindsay Solicitors, NewcastleLachlan Page is a Solicitor at Mullane & Lindsay Solicitors and practices extensively in commercial, business and property transactions and adviceIf you require any assistance in this area please contact Lachlan Page to arrange a consultation or contact our Newcastle office.

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