What do I need to consider when buying a business?

What do I need to consider when buying a business?

On Behalf of | Mar 12, 2015 | Uncategorized |


Buying a business requires careful research, due diligence and the evaluation of a number of factors and opportunities. First, it is important to identify the best business for your business to purchase and then begin to conduct due diligence.

It is crucial to have a thorough picture of the business’s finances, including if it is viable and is without too much debt. As part of this process, the business’s financial statements and tax returns should be reviewed. It is also important that the potential purchaser of the business review sales tax records, because new business owners can sometimes be held responsible for paying unpaid taxes. In addition, it is important to review if the business has any outstanding debts, liens or accounts receivable. Lastly, cash flow and income statements should also be thoroughly reviewed.

It is critical to also keep in mind that any existing obligations of the business you are seeking to purchase that may exist through contracts, leases or employment agreements, among other obligations, need to be fully understood. Make sure to also be thorough concerning employee records and employee-related materials if any employees are part of the acquisition. It is crucial to determine if the entire business will be purchased or only certain assets, and to ensure that necessary steps are taken and appropriate paperwork completed to properly record the arrangement.

Do not forget to have a thorough knowledge and understanding of the business structure of the business being acquired. Each business form presents different legal requirements and tax requirements. It may be advisable to create a new business entity, so it is important to understand obligations and liabilities, including personal liabilities, which may be implicated by one business form or another.

When considering buying a business, there is a seemingly endless list of important details to consider. Understanding each consideration, however, can help ensure a successful acquisition and a successful business down the road.

Source: Small Business Administration, “Buying a Business – Key Legal Steps and Considerations to Bear in Mind,” Caron Beesley, March 2, 2012