Purchase of business is the process of acquisition of old business by a company. Promoters can acquire a business and sell it to another company at a profit. The persons who sells the business is another company is called the “vendor”. The money paid by the purchaser is called “purchase price”, the purchase of a business must involve agreement between the parties.
In the purchase of business,the assets,name and connection of the business will be taken over,hence,goodwill must be paid for. A revaluation of assets and liabilities will be required, the amount paid to acquire the business is known as the consideration. The excess of the purchase consideration over the net value of the asset is called”goodwill”, if on the other hand,the purchase consideration is lower than the net assets,the purchaser has gained the advantage of “capital reserve”.
In some cases he may acquire all the assets without cash and leave the vendor to discharge the liabilities of the business. Lastly,the purchase consideration can be paid in cash or shares…
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