buying that
ricky little

US:

ARE you thinking
about buying that nifty
business in Ambleside
or Edgemont Village?
Or are you considering
selling your existing
business?

Ifso, keep these key
points in mind.

Ifthe business is owned by
an individual or partmership,
you must buy or sell the
assets. But if a company car-
ries on the business, rhe
transaction may be structured
as either a purchase and sale
of the assets or of the shares.
How to decide?

A seller generally ends up
paying less tax ifhe sells the
shares of DDD Delicious
Doughnuts Led. than if he
sells the company’s cquip-
ment, furniture and invento-
ry. As a result, the purchase
price is often jess for a share

sale than for an assct sale.

Also, in a share sale, the
buyer automatically gets the
company’s goodwill built up
over the course of the busi-
ness.

This is important if you, as
the purchaser, are relying on
the bakery's reputation to

keep customers munching
their daily doughnuts and you
rolling in the dough.

But if you buy the assets,
you don’t get the
“DDDDelicious Doughnuts”
name unless you specifically
purchase it.

So, while you may get the
same location, ovens, and

* blue wicker chairs, you may
not get the same customer
loyalty in an asset sale if you
cannot buy the name.

“Bob’s Bakeshop” may
no: have che same draw as
“DDDDelicious Doughnuts.”

On the other hand, a
share sale means acquiring the
entire business, so you
assume all its liabilities,
including potential liabilities
which may not be known or
disclosed by the seller when

- you make the deal. From the
buyer’s perspective, this may
outweigh any price advantage
obtained.

Also, in a share sale, con-
sents may have to be obtained
from many people if the
shares are owned by more

-than one person. This can be
a big hassle if you have to
deal with Dave Dutton, his
bitter ex-wife and his former

Reunited after 51 years |

Judy Smith
Contributing Writer

“IT’S been so much
fun.” .

That’s how Joyce
Macmillan describes hearing
from her old friend Eleanor
Anderson.

The News ran the story
last week about the Grade 1
classmates who hadn’t seen
each other since 1947. By
5:30 p.m. on the day the story
appeared, Macmillan was
dialling Anderson’s phone
number in North Vancouver.

“It was just like yesterday.
Imagine, after 52 years,” she
marveled, adding her phone

iness

mother-in-law who lives in
Peru, all of whom own shares
in the business, In an asset
sale, vou only deal with the
owner of the assets,

For these and other rea-
sons, a seller generally preters
to sell shares, while a buyer
often prefers to purchase
assets.

ifyou have a choice, con-
tact vour lawver before you
start negotiations, The best
way fora buyer to approach
the purchase may be by a
non-binding letter of interest.
You can then examine the
company’s financial state-
ments and other records to
find out the true financial
state of the business before
committing yourself.

Another key point is to
get the seller to agree toa
non-competition provision.
You don’t want Dave, who's
just sold you the business of
“DDDDelicious Doughnuts,”
opening up “Dave's
Decadent Doughnuts!” right
next door and stealing your
customers.

However, any non-compe-
tition restriction must be rea-
sonable to be enforced. It
must not last for too long a
period of time, cover too
wide a geographical area, or
restrict conduct beyond the
scope of activities of the busi-
ness purchased.

Finally, you'll want to

obtain as many warranties and
representations about the
business as you can. Scllers
will, of course, want to limit
these.

If you involve your lawyer
early on in the negotiations,
he or she can advise you on
these and other terms that
should be part of your con-
tract for purchase and sale.

=~ This column is written
with the assistance of the North
Vanconver law firm of Ratcliff
ce Company, Suite 500, 221
West Esplanade, 988-5201.

The column provides informa-
tion only and is not to be relied
on for legal advice.

hasn’t stop ringing with other
old friends calling to remi-
nisce.

Macmillan, who now lives

‘in’ Nanaimo, attended St.

Joseph Catholic School in
Vancouver with a tight-knit
group of six girlfriends.

When she recently heard
from onc of them, they came
up with the idea of a reunion
and set about to round up the
rest of the group. But the
catch was they couldn’: find
Anderson.

Macmillan said it was a
thrill to ralk to her childhood
best friend and looks forward
to getting together with all
her old pals in early October.

OLTRALINE GAS.

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