Deciding to buy a business can be an exciting yet stressful decision. There's a lot to consider when purchasing a pre-existing business and of course you'll want to protect yourself and your pre-existing assets. Shigo Law Firm, P.A., has helped hundreds of entrepreneurs and enthusiasts in Gainesville and Ocala come together for a lucrative cause.
There are a lot of instances where it is better to buy a business than start one of your own, especially when the business is making a profit. But even struggling businesses can become a worthwhile venture if you know what it takes to turn the profits around and you're able to commit.
Shigo Law Firm's Tips for Business Purchase
- Always buy a business that is in an area of your expertise. If you know nothing about the industry or the way a business is structured, you're going to struggle to make the right decisions. Even worse, vendors, employees and even your consumers might take advantage of your limited knowledge which will definitely lower your profits. We also recommend buying a company that excites you, whether it be your lifelong dream or a passion-filled hobby, you're likely to do better business when you like what you do.
- Do your research about the company until you can't learn anything new. Find out about its startup, financial history, owner history, accounts receivable and payable, employee contracts, benefit statements, leases, vendor contracts, legal documents, etc. When you buy a business, you don't want to have any surprises or lawsuits lurking in the past that you don't know about. At Shigo Law Firm, we refer to this as doing your due diligence, and we really emphasize how important this step is in the buying process. Surprises are hardly ever good in a financial situation. And having an attorney help you with the process can make obtaining certain documents easier. And remember, if a seller is withholding information, there's probably a reason. Always stand firm — if the seller won't provide documentation, it may be possible to obtain that information elsewhere, like through public records.
- When you've found the perfect business for you, and you've vetted it thoroughly, negotiations can begin. You'll want to have the business and property appraised, which includes any large pieces of machinery that you're interested in purchasing. You'll also want to discuss the terms of payment. Even a sale between friends can turn ugly quickly, so always be sure to create a written agreement that both parties sign. Our attorneys can help you draft such a document so that you can be sure you're protected by the arrangement.
Documents To Consider
The purchase of a business should not be done with haste, and you should always document each step of the process. This can help avoid any misconceptions in the future, and it's always best to know where the buyer and seller stand on price and value of the business. We recommend utilizing the following documentation to your advantage:
- A letter of intent includes the buyer's interest in the business, a proposed buying price, payment terms, and any other conditions that may affect the sale/purchase.
- In order to gain access to sensitive data, a confidentiality agreement may be required. This agreement states that the buyer will not disclose sensitive information about the seller or the business for purposes unrelated to the purchase.
- Buyers should request an attorney look over existing leases and contracts so they fully understand the terms. Buyers will have to conduct business within the parameters set forth by these legal documents.
- Tax returns for the previous years can provide valuable information about the types of deductions the company takes, the amount of profit it earns, and even whether there are tax liabilities that are outstanding.
There's much more to buying a business than we've included here, but these are all important pieces of information to consider. We recommend working with an attorney to make the process easier and to make sure you aren't forgetting any important steps. Our attorneys can be of assistance through every part of the business purchasing process, so don't hesitate to contact us and begin your dream of owning a business.