Investors and entrepreneurs can own businesses in a number of ways that include starting the business from scratch or buying an existing business. Entrepreneurs start businesses at times with the intention of selling those businesses when they build them to a certain point and get a suitable offer.
Although buying an existing business may seem like an easy way to break into the market and a straightforward process, a lot of things could go wrong if proper attention is not paid to certain details. This article covers the details which one should pay a lot of attention to before they buy a new business.
The taxes that apply to businesses differ across locations. Even within the same country, in different states, the taxes applicable to a business can differ, and it is important to confirm the taxes that apply to a business before buying it. These taxes include sales taxes, use taxes and payroll taxes.
Confirming the taxes that apply to business and ensuring that no taxes were owed will save one a lot of troubles in the future. Word of mouth will also not be sufficient as regards the taxes claim, and it is important to seek a clearance letter from the appropriate tax authority before the business is transferred.
Business or Assets?
Before buying a business, it is also important to confirm if the transaction is for the business or the assets of the business. Here’s how both situations differ. When one buys the business, especially if the business is incorporated, they buy everything about the business including the debts and taxes, which may be higher. When one buys assets, on the other hand, they do not inherit the troubles of the business and are bound to get better taxes.
Before buying a business, it is also important to confirm how the accounts will be treated afterwards. This is important especially if the business had customers with outstanding payments. When issues concerning the accounts of the business are properly treated, they would be no misconceptions about who follows up on customers with outstanding debts.
It is important to mention that when the new owner of the business buys the debt of the business and follows up on such customers, it creates room for them to establish a relationship with such customers.
It is also important to confirm, before buying a business, the form of ownership of the property where the business is based. That way one can negotiate on maintaining the ownership of the property for an extended period without incurring extra costs.
If the property where the business is base is leased, it is important to find out how much more time is remaining on the lease and whether it will be possible to extend the lease without incurring extra costs.
It is especially important to confirm the form of ownership of the property where the business resides and operations are made to ensure smooth transitioning and maintain the existing customer base. Maintaining extended ownership of the property will also help with expanding the reach of the business.
As long as attention to paid to important details such as those mentioned above, buying a business can be a seamless process.