There are some falsehoods that circulate frequently when people are considering buying a business.
Once you know the truth about these misconceptions, buying a business need not be a frustrating or puzzling experience, and it can frequently be preferable to establishing a business from scratch.
Are you interested in purchasing a business but unsure of where to begin your search?
Having your own consultants is unnecessary if a broker is involved.
No matter how small the initial investment is, buying a business is a serious undertaking. If you can’t afford to throw away the purchase price or take on unforeseeable obligations after the sale, you should have your own advisors (who represent solely your interests) look over the deal from a tax and legal standpoint. Involve your financial advisor, if you have one, and have them review potential liability concerns related to this new investment.
Once the sale has been finalized, the seller is no longer a concern.
It is common for the buyer to require the seller to continue working for the company after the sale has closed, either for compensation or as a consultant. It’s also important to give some attention to whether the buyer expects the seller to stop working in the business and to confirm that the seller is okay with this. If it’s crucial that the seller not become a rival shortly after the sale, don’t rely on verbal promises alone; obtain them in writing.
A business broker will make things more complicated.
A wide range of attorneys and auditors have differing views on whether or not brokers should be included in transactions of varying sizes. A qualified business broker, however, may help keep a deal moving forward regardless of who is involved. A business broker’s role is analogous to that of a real estate agent in the home-buying process; they help both the seller and the buyer stay on good terms throughout the transaction.
The deal can only be structured in one way.
Buying an already defunct company and acquiring merely its assets can help you avoid taking on the seller’s debts, but there’s always an exception to every rule. Don’t jump to conclusions about whether the transaction should be structured as an asset or stock without first considering the obligations and tax implications of each.
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