How to Make Buying a Business Less Stressful
There’s no doubt that purchasing your first home can be pretty nerve-wracking. However, some might say it pales in comparison to buying a business. Notwithstanding, the trade-offs from working for someone else to being in charge certainly make the stress worthwhile.
Meanwhile, the decision to buy an existing business should be made with caution. It’s not something you should do on your own and worry about the consequences later. An attorney with experience in business law can help save you some future heartache.
A Business Buying Checklist
First, if you’ve decided to set up shop on your own, you have a couple of choices. You could start off fresh with your own name and products or service offerings. Candidly, the downfall is that you have no way of knowing if your concept will work.
When you purchase an existing business, you have some advantages. For starters, you will have the benefit of reviewing financial records to determine the pulse of the company you’re buying. Next, you may assume inventory and equipment, as well as a solid client base. Without question, there are several rewards to purchasing a business with an established brand and reputation.
Notwithstanding, there are risks involved. You might compare a business purchase to buying a used car. You really don’t know if you’ve taken on someone else’s problems. With that in mind, here are some tips to making your transaction smoother:
- Conduct Due Diligence: When you buy a new business, one of your first steps needs to involve due diligence. This means doing a complete analysis of your prospective purchase. Don’t rely solely on what the seller wants you to see. Of course, you want to see company assets. However, you also need to review the company’s debt. Get a clear understanding of what is included in the sale. Otherwise, you may find out that the seller plans on holding on to such things as intellectual property rights that can cost you a pretty penny. Find out if inventory and equipment are part of the prospective deal
- Negotiate the Price: It doesn’t matter if you’re purchasing your first business or own other companies. Negotiating your price can be a taxing experience. Your attorney can help you determine fair market value. Keep in mind that there are a few ways to establish valuation. For example, the worth of some companies may be based on prospective income. Others are solely calculated on assets. Still, others are reliant on market value. How does the business compare to other similar companies
- Legal and Tax Consequences: Of course, you want to consider legal and tax consequences when you’re conducting your initial due diligence. Without a doubt, the two most important professionals you need when buying a business are an attorney and an accountant. The sales contract should thoroughly outline the transaction. Will you be taking on existing employees? What about real estate? Does the company purchase include sale or lease of a warehouse or office space? If you want to save yourself stress when you’re buying a business, one of the most important things you can do is to put your trust in experienced legal counsel.
These are just some of the steps in purchasing a business. For example, you may not realize the implications of the Texas Uniform Fraudulent Transfer Act and the transfer of the business to you. Again, it is crucial that you have a clear understanding of the entire transaction.