30 June 2022

It is a Going Concern - Selling your Business

Submitted by SchoemanLaw Inc

By Cheralco Worship


Whether you are in the process of or simply just contemplating selling your business, it is imperative that you consider all the factors that go with it. It is crucial to determine what it is you are selling and how you want to sell it. The same goes for the purchaser in terms of what they are buying. In many instances, when a business is being sold it is not just the enterprise that is being sold but everything that comes with it like the immovable property, employees and the product of the business. Many businesses often get sold as a going concern.

What is a Going Concern?

After a business has been sold and it is the same after the sale as it was before the sale the business is said to have been sold as a going concern. This does not necessarily mean that the entire business is required to be sold, a specific division or function of the business can also be sold. Applying the concept of a going concern in this manner is to cater for businesses that outsource certain functions.

The benefits and implications of selling or buying as a going concern

When selling or purchasing any business as a going concern, the process usually involves the transfer of all employment contracts and contracts dealing with the outsourcing of certain divisions or functions of the specific business. After the transfer, the same condition would exist from the previous owner and move over to the new owner. The impact that this transfer has on the employees is provided for in section 197 of the Labour Relations Act, which requires the new owner or employer to take over all the obligations towards the employees from the previous owner.

Additionally, when you sell your business as a going concern there are particular tax benefits. If both the purchaser and the seller are registered VAT vendors the transaction will be considered “zero-rated”. However, for this to occur, the parties have to agree that the business will be sold as a going concern and must be VAT vendors.


In conclusion, knowing how legislation should guide your decision-making and how to avoid decisions that could result in financial loss or legal issues is crucial. Therefore, please consult with a legal professional before entering into any agreements relating to the purchase and sale of a business as a going concern.

Contact an attorney at SchoemanLaw for your legal needs by visiting our website at www.schoemanlaw.co.za.

Cheralco Worship

SchoemanLaw Inc

SchoemanLaw Inc

SchoemanLaw Inc Attorneys, Conveyancers and Notaries Public is a boutique law firm offering its clients access to high quality online legal documents and agreements, together with a wide range of legal services. The firm has an innovative and entrepreneurial mindset that distinguishes it from other law firms. We apply our first-hand understanding of the challenges facing entrepreneurs (regardless of their business size) to develop proven, practical solutions incorporating legal compliance, risk aversion and business sense. We achieve this by offering clients tailored, yet holistic support comprising of legal gap analysis, the design of tailored legal solutions and the practical implementation thereof through training and automation. With your personal interests in mind, our ultimate aim is to implement measures that protect the results of your hard work as effectively as possible.