Business assets

Definition

A business goodwill is the set of movable and intangible elements that an operator brings together to carry on its activity and retain a clientele. It is not to be confused with the premises, which are immovable property, nor with the company that operates it, which is a separate legal person. The expression refers to the working tool itself.

The clientele is its essential element. Without a clientele of its own, there is no goodwill to transfer, only isolated assets that can be sold separately. The other components are included only because they help to attract and retain that clientele.

The concept is first and foremost a concept of transfer. The goodwill is sold, leased or given as security as a whole, without any need to dispose of each component separately. Its classification produces precise effects on the instrument to be drawn up, on the publicity of the transaction, on the rights of the seller's creditors and on the lender's security.

What the business assets comprise

The customer base

A business without its own customer base does not constitute a business assets. The customer base means the persons who habitually deal with the operation, on account of its location, its service or its reputation.

The intangible elements

These include the trade sign and the business name, the right to the lease that allows occupation of the premises, the trademarks and the licences that authorise the activity, as well as the administrative authorisations attached to the operation. These elements are difficult to reconstitute in a transfer.

The tangible elements and what is excluded

The equipment, the tools, the furniture and the goods in stock complete the business assets where they serve the operation. Excluded from them are the building, the receivables and the debts, whose fate depends on the deed, and the contracts that are not assignable.

The transfer of the business

The sale covers all the assets and is distinct from the sale of shares, which changes the partners without changing the operating company.

The deed of sale and the price

The written deed describes the assets transferred and sets the price. The price may be paid in cash or in instalments, with the purchaser committing to a schedule. The seller may reserve a security interest over part of the business.

Publication and the seller's creditors

The sale is published, in particular in the BODACC, to start the time limits for the seller's creditors' rights. The latter have a short period, running from the last publication, to file an objection and claim the price from the purchaser.

The pledge taken as security

A person financing a takeover may request security over the business, known as a pledge. It is registered in the register kept by the court registry and covers the designated assets, most often the goodwill, the trade name and the equipment.

Frequently asked questions

What is the difference between selling a business and selling shares?

Selling the business transfers the operating assets and the obligations attached to them. Selling the shares transfers the status of partner; the company remains identical and keeps its identification number.

Can the business be given as security?

Yes. It can be subject to a pledge in favour of a creditor, in particular the lender financing the takeover. The security interest is registered and published, which makes it enforceable against third parties.

Is the sale of a business published?

Yes. The publicity, in particular publication in the BODACC, informs third parties and gives the seller's creditors a period in which to object to the price. The transaction is also entered in the registry of the court registry.

Is premises enough to constitute a business?

No. The premises are real property; they are not part of the business. An activity carried on in premises may not constitute a business if it has no customer base of its own. The location comes into play only through the right to the lease.