There are good reasons for buying a business. To begin with, the business is already established. Regardless of its current financial status, you know that this business already has a name in the industry. It has followers and even loyal customers. You might prefer to run such a business than start from scratch.
Not all businesses though are worth buying. Others are difficult to build and no matter how you try, you can’t pull it up. Therefore, you need to take your time in determining which businesses are worth buying. Here are some tips to help you.
Buy the assets and not the business
You will have the option of buying the stock in that business or buying the assets. Choose the latter. In doing so, you can form a separate company and transform the business. Buying the stock will make it difficult for you in terms of the taxes to be paid. You will also end up assuming the liabilities that the business has. If the business owes money to someone, you could be liable.
Determine the law on taxes
There are places in which you can still be asked to pay taxes despite the fact that it was the responsibility of the previous owner to do so. The key is to check if the business has cleared all its tax obligations. If yes, ask for a clearance letter so that the business will be transferred to you with a clean slate. You want to start the business with enthusiasm and not with a huge tax problem.
Check the lease agreement
Find out what the terms and conditions are regarding the lease of the property in which the business is currently operating. If the agreement is that you can continue with the lease and pay off the remaining months or years in the contract without changes, it would be great. On the other hand, if the lease agreement changes due to the change of business ownership, check again if the lease is reasonable enough. If the rates are drastically increased and the contract goes back to zero, don’t accept it.
Get indemnity from the seller
There might be small details overlooked in the process. For instance, if the seller has a debt that was unpaid, you could end up taking on responsibility for it. The indemnity letter will clear you of all these responsibilities. If there is a lawsuit, the previous business owner should be the one paying the fees and facing the court to defend it, and not you.
Compare the choices
There are a lot of businesses that could be interesting for you and you think are manageable. Take a look at these options. Don’t settle for whatever you find first as there could still be better options. You can buy or sell with Hilton Smythe since they are experts when it comes to these matters.
Once you have made up your mind, sign the documents and run the business with dignity and pride.