Selling A Business As A Going Concern

It may come as a surprise to you, but there are actually many ways in which you can sell a business. One particular way is by selling the business as a going concern. This is basically when the business is sold with everything that is necessary in order for the business to continue operating. This is quite different than when the business is sold in other ways and not as a going concern. For example, it is possible to sell a business where the buyer can run the business but under a completely different name and even in a different location. Another way a business can be sold is where only the equipment, client and other aspects of the business are sold to the buyer. However, when a business is sold as a going concern, the seller has to provide everything that is needed for the buyer to continue operating the business as is. Also, the seller would also be responsible for continuing to run the business until the actual date of the sale which is also known as the settlement date. One interesting aspect of this particular type of business sale is that it may be exempt from GST or Goods and Service Tax. However, in order to qualify for this exemption, the buyer has to be already registered for GST, the payment made has to be only for the sale of the business, the seller has to provide everything needed in order for the business to continue running and that there has to be a written agreement between the seller and buyer which indicates the sale is that of a going concern. If you're a bit confused, we will use an example for clarification. So, in this example, you are trying to buy a book store for $70,000 in Orange County. In order to qualify for tax exemptions as stated above, you will need to be already registered for GST. There will also need to be a sale of business agreement (SOBA) that is between you and the seller which clearly states that the book store is being sold as business of going concern. Additionally, the seller of the book store will need to continue running it until the settlement date and when that date arrives, they have to provide everything you need to continue running the store. This includes a transfer of the lease, equipment necessary to run the book store, book supply accounts etc. Once all of these conditions are met, then the purchasing price of the book store would be exempt from the Goods and Services Tax (GST). There are a couple of things you should also carefully consider when selling or even buying a business as a going concern. For one, if you've never done this before, it is imperative that you seek legal advice to ensure you're doing everything you need to on your part. It is also best to get tax advice on GST laws by a tax professional. In summary, we have just looked at what is selling a business as a going concern and a few guidelines on how to get GST exemption on this sale. So, be sure to keep the above advice in mind and get the right legal and tax advice to ensure you're well covered.