Purchasing a running business
| Fatwa #764 | Category: Business & Trade | Country: Uzbekistan | Date: 20th September 2023 |
| Fatwa #764 | Date: 20th September 2023 |
| Category: Business & Trade | |
| Country: Uzbekistan | |
Question
Assalamu aleikum i want to buy 50 % share of my friend’s business…He started this business two years ago and this business has a good income…He said that his business costs 80 000 usd…Can i firstly give him 40 000 usd and the rest of money during 7-8 months ? 6000 usd each month?
Answer
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
We understand from your query that you can currently afford to purchase half of the business, but intend to purchase the other half as well over a few months.
There are two ways you can structure the sale.
- The friend (seller) will sell you (buyer) his entire business for $80,000 but on credit and payment terms.
Example: The buyer and seller will agree that the buyer will make a down payment of $40,000 and thereafter monthly instalments of $5,000 for the next eight months. Both parties will specify exactly what the terms and dates of payment are.
In this structure, once the seller agrees to the sale, the buyer will now fully own the business and the seller will have no rights to the business. The buyer will now owe the seller $40,000 as down payment and monthly instalments as agreed.
- The seller will sell only half of the business. Therefore, the buyer will pay $40,000 and both the buyer and seller will become 50-50 partners in the business.
Once they are partners, if the original buyer wants to purchase the other half of the business over time, each time he has some funds, he can purchase an additional portion of the business, such that the sellers share in the business will reduce in proportion to the amount purchased by the buyer.
Example: The buyer and seller are 50-50 partners. Each partners share in the business is $40,000. Some time later, the buyer has $5,000 in hand and wishes to purchase more of the business. He can offer it to the seller in lieu of a percentage of his share. In this specific situation, by offering $5,000 for a portion of his $40,000 share, the buyer will now own 56.25% of the business and the seller will own 43.75% of the business.
Note: Each time the buyer and seller wish to transact further, they should revalue the business to ensure the correct figures are utilised when making a new sale arrangement.
And Allah Ta’āla Knows Best
Mufti Bilal Pandor
Concurred by
Mufti Muhammad IV Patel
Darul Iftaa Mahmudiyyah
Lusaka, Zambia