You are meeting with prospective clients, Bill Smith and John Jones. They have been referred to you by their accounting firm, Buckland Accountants.

The prospective clients need assistance with the acquisition of owner-occupied premises to replace their current business premises, which they rent and is becoming too small for their growing business.

True Blue Pty Ltd trades as True Blue Real Estate and was purchased as an existing real estate business three years ago. Bill Smith and John Jones are the directors.

The shareholders of True Blue Pty Ltd are Bill Smith, John Jones and a private investor, Amanda Williams, who does not work in the business and has no involvement in its day-to-day operation. Each holds an equal one-third share in the company.

Bill and John have each been in real estate for approximately 15 years, focusing on residential sales and leasing. They have gained their work experience in the local area. A wealth of knowledge of the area, coupled with an ever-expanding client base, has resulted in sustained and solid growth for the business.

Details of the property

Sale price of the property is $950,000. (There is no GST requirement as it is being purchased as a going concern.)

A deposit of $95,000 has been paid and is being held in the trust account of the settlement agent/solicitor.

A cash contribution of $233,240 will be made from the general working account of the business.

Property purchase and loan to be in the name of a new entity True Blue Pty Ltd as trustees for the Smith Jones Unit Trust. There are a total of 99 units in the trust and the unit holdings mirror the shareholding of the trading entity, True Blue Pty Ltd.

The property is situated at 100 Smith St, Yourtown, with contracts exchanged at today's date and an anticipated settlement date of 90 days.

General observations about the property

The property is in good condition and is well located in the same street as the current rental premises.

It is anticipated that the premises will meet the needs of the business for the next 10years.

Can you help me list of questions that you would need to ask Bill and John about their history, experience, business performance and the property purchase.

In preparing your list of questions you should ensure that you cover the following:

the complex features of Company and Trust structure and benefits that will come to the Company from purchase of this property

the identification of potential risks in such a transaction and Bill's and John's tolerance of risk

the financial aspects of the transaction and current financial position of the business.

In addition to the list of questions, please also comment on any potential risks you identify (you are permitted to make assumptions here). In considering these risks you should consider:

-how you would identify the risks and the criteria you used to evaluate these risks

-how you would assess their current debt exposure; the tools you would use in terms of risk probability, impactand consequences.