Buying out an already existing business instead of beginning a new one can prove to be an excellent option for most prospective business owners. A business that’s already established will already be training and come with an existing customer base.
Having said that, chances are you’ll be inheriting issues the business was struggling with. For this reason, you need to be totally aware of what you’re getting into and be honest with yourself on your ability to operate a business. You’ll want to do a detailed inquisition into the business you’re planning to buy, ensuring it’s feasible and already has a developed market for the products and services they are offering.
In addition to all that, there are various legal aspects entailed in buying a business to consider also. Here’s what to know.
1. Get Professional Advice
A key component of due diligence is ensuring you’ve received sound professional advice. You will want to find out as much information about the business as possible. At the very least, you will require the services of a certified accountant to look over the accounts and finances, and an attorney for investigating check licenses and registrations, legal issues like employment contracts and regulatory issues like regulation of undertakings. You will also require an attorney to assess the purchase agreement.
2. …And Get That Advice Right Away
When you decide to buy a business, getting professional guidance should be considered from the very beginning. Although said advice will most likely cost some money, getting such expertise can prove to be the difference-maker between your business venture failing and succeeding.
Having already signed on the dotted line, the last thing you want to deal with is employee disputes, or find out that your new business is under and owes thousands of dollars of tax, or perhaps the business isn’t operating using the correct licenses.
3. Know What Sort Of Advice You Need
When purchasing a new business, attorneys will give you proper guidance on evaluating the drafting and give you an understanding of the purchase contract. They should also guide on any regulatory and/or licensing problems and also safeguarding the business’ intellectual property.
You should also make a point of ensuring your attorney assists with identifying and making sure disputes are solved before you buy, analyzing liability and employment contracts therein, as well as assessing the authenticity of commercial contracts involving the business and clients and/or suppliers.
It’s a pretty huge undertaking taking on a business. You may have your reservations for not hiring professionals to help; however, they are more skilled in such workings, and they are aware of precisely what to look for and anything of concern.
4. Never Take Anything For Granted
Always ensure you have negotiated with the owner “subject to contract.” Just as with purchasing a house, negotiating “subject to contract” is a method you can keep your options open in the event anything goes sideways. If not, you might find yourself in a binding contract for the buy. Moreover, always take a sceptical approach. Question and query everything regarding the business. For instance, why is the business up for sale in the first place? Are there lots of bad reviews, does it owe money, is the product going to be obsolete soon? These are all questions to ask.
5. Don’t Be Afraid To Negotiate
Ensure you enlist the services of an accountant to give you an exact figure of the business you are purchasing. The price might be high. Negotiation, in this case, is everything, and there’s really no right price. It’s all on you use all the information available to negotiate a deal that’s acceptable and as low as possible for you.
