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How to Buy an Investment Business in Australia
Are you an overseas investor who wants to buy an investment business in Australia? Follow this six-step guide.
Buy an investment business in Australia
It’s possible for overseas investors who are not citizens of Australia to buy an investment business in Australia. In some cases, you may not even require a visa to do so. Many non-citizen investors choose to open an entity in Australia and purchase an investment business through that entity, even though they don't have citizenship or residency. However, buying an investment business in Australian can be a risky option if you’re not planning to take a hands-on management role—particularly if the business is worth $20 million or less.
Follow these six steps to set your Australian investment business up for success…
Step one: Define your investment goals
Before you buy an investment business in Australia, it’s important to define your investment goals. For example, ask yourself what are the purposes of the investment? Is it purely for passive investment or is it to gain residency? If you fail to clearly define your goals, it’s impossible to achieve them. With goals in place, it becomes much easier to create an investment plan to meet those goals.
Step two: Speak to a migration agent
Smart investors know to always seek expert advice before committing to any major investment. In this case, it pays to speak to a migration agent. They’ll be able to run you through the changes that have been made to Australia’s foreign investment rules over the last 24 months so you’ll be better informed.
Step three: Identify the type of business to buy
Non-citizen investors need to be very careful about the type of investment business they choose to buy. Especially if they're not planning to move to Australia to take a hands-on role in the running of the business.
For example, if you live overseas it’s probably not a good idea to buy a café or restaurant that requires intensive on-site management. Instead, you may want to consider buying a food manufacturing business, a packaging business or an import/export business where someone else can manage the day-to-day operations.
Step four: Seek a local advisor
To run a successful Australian business, you need to know the Australian market. This is where a good local advisor, who is on the ground in Australia, becomes so important. You’ll especially need their assistance for the first 12 months of operations as you establish the business in Australia or implement a growth plan.
Step five: Retain key staff
Your assessment of the business you’re considering buying should not be purely financial. For example, assess the key staff and their expected longevity in the business. You may want to increase the stake your key staff members have in the business by putting them on a retention plan with perhaps a profit share; this is to create an attractive long-term working environment for them.
Step six: Appoint directors
There may be issues around who you appoint as the directors of the business. In a lot of cases, non-citizen investors appoint an accountant who is an Australian resident as a director with zero profit share. That way, ASIC sees an Australian director and a non-citizen director in charge of the business.
Article written by Dan Levitus, Business Broker - LINK Sydney