In the process of buying a business, the purchaser should conduct a due diligence review to establish that they are buying what they believe they are buying. The review identifies areas of risk and contingent liabilities that the business may have and to factor these risks in the purchase price.
When buying a business, or the company that conducts a business, there are many tax issues that the purchaser needs to consider prior to the contract being signed.
In most cases a purchaser acquires the assets of the business unless there are significant commercial reasons for buying the company (e.g. contractual obligations that cannot be assigned). Purchasing the assets of the business nullifies the risk of assuming the company’s liabilities, some of which may not be known or readily identifiable.
This checklist was updated in July 2022 by Peter Bembrick, tax consulting partner, at HLB Mann Judd (phone 02 9020 4000). It includes a comprehensive due diligence review of the major income tax, GST, structuring, capital gains tax and other tax issues associated with the purchase of either the assets of a business or the shares in a private company that operates the business.
The Business Purchase Tax Checklist
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