Are you contemplating buying an existing business?
Business owners sell perfectly successful enterprises all the time, so there’s definitely a possibility that you’ve found a good deal. Sometimes, owners simply want to retire. Sometimes, an entrepreneur’s creative energies just change course. Whatever the reason, you’ve got a golden opportunity to become your own boss, right?
Maybe. Maybe not. Before you agree to purchase an existing business, there are some very specific questions you need to ask. They include:
1. Are all the taxes caught up?
If you buy a business, you buy its tax debts too — which is why you need to make certain that the sales taxes and the payroll taxes are completely paid up. A clearance letter can give you reassurance from the tax authorities. If the current owner can’t get one, walk away.
2. Are there any pending lawsuits?
Lawsuits happen in business, but you don’t want to be responsible for something that occurred before you were even there. Get a letter of indemnity from the current owner, so that you don’t have to be responsible for any known or unknown lawsuits arising from any situation prior to your ownership.
3. Will the employees stay on?
Part of the reason you may want to buy an existing business is that the owner and employees have all crafted relationships with the customers. You want to see most or all of the company’s current employees stay on. It can be helpful, also, if the current owner agrees to stay around for a transitional period. That can help transfer the goodwill customers feel for the owner over to you — and that’s valuable when you’re buying a place that’s up and running already.
These are, naturally, just some top concerns you should address before you buy an existing business. Talk the pros and cons of any business purchase over with an attorney and look for ways to minimize your exposure to legal problems and maximize the potential you have of success in your new enterprise.