We present the first VI CCD photometry for the Sculptor group galaxy ESO 540-032 obtained at the Very Large Telescope UT1+FORS1 . The ( I, V - I ) colour-magnitude diagram indicates that this intermediate-type dwarf galaxy is dominated by old , metal-poor ( [ Fe/H ] \approx - 1.7 dex ) stars , with a small population of slightly more metal-rich ( [ Fe/H ] \approx - 1.3 dex ) , young ( age 150 - 500 Myr ) stars . A discontinuity in the I -band luminosity function is detected at I _ { 0 } = 23.44 \pm 0.09 mag . Interpreting this feature as the tip of the red giant branch and adopting M _ { I } = -4.20 \pm 0.10 mag for its absolute magnitude , we have determined a Population II distance modulus of ( m - M ) _ { 0 } = 27.64 \pm 0.14 mag ( 3.4 \pm 0.2 Mpc ) . This distance confirms ESO 540-032 as a member of the nearby Sculptor group but is significantly larger than a previously reported value based on the Surface Brightness Fluctuation ( SBF ) method . The results from stellar population synthesis models suggest that the application of the SBF technique on dwarf galaxies with mixed morphology requires a detailed knowledge of the underlying stellar composition and thus offers no advantage over a direct distance measurement using the tip of the red giant branch as distance indicator . We produce the surface brightness profiles for ESO 540-032 and derive the photometric and structural parameters . The global properties follow closely the relations between metallicity and both absolute magnitude and central surface brightness defined by dwarf elliptical galaxies in the Local Group . Finally , we identify and discuss a non-stellar object near the galaxy center which may resemble a globular cluster .