What You Must Know When Buying a Business

Article Contributed by Mark G
A very rewarding endeavor could be buying a company that already exists. One of the primary reasons to buy an existing business is to avoid ‘start-up’ costs. The opening costs of beginning a new business venture can be astronomical, aswell as the costs of advertising, and all of this with no guarantee of making a profit on your investment. You will be able to see the track record of an existing business’ income and expenses. Giving you an idea of what you can expect.
There are quite a few legal things to take into account when buying a up and running business. Initially, you must make sure that you know exactly what you are buying. Have you decided to either acquire the entire business entity or simply buy its assets?
The assets you are planning to purchase, what are they? When making an asset purchase, it is of utmost importance to put in writing precisely what the assets are so once the transaction has
closed there aren’t any unforeseen issues. Make a list of the all the physically identifiable assets. For example a photocopier, list of customers, office furniture, etc.. You also should make the list of intangible assets, i.e. the email addresses, phone numbers of the current business. The inaccurate assessment of assets included in the purchase account for many of the business transaction claims that are raised.
Will a landlord agree to you taking over any lease agreements? For some companies the merit of the business includes an affordable lease agreement in a good location. If you are purchasing a business on leased premises, you will need to obtain the consent of the landlord prior to assuming the existing lease. This is almost always contained as a stipulation of the Agreement. When looking to lease office space, a landlord will require, at minimum, your credit history and information about your business experience.
What type of obligations do you have towards the Employees. You need to look and see if the business you are considering buying has a lot of full time or part time employees. If this occurs, you’ll be responsible as a subsequent employer for money owed to these employees, including wages, vacation pay, unemployment insurance premiums, and premiums from worker’s compensation. Your best choice when considering purchasing a business may be to hire all new employees. The reason is that there maybe a lot of obligations that may come with the existing employees. When buying a small business, some prefer to have a written agreement in which the vendor will terminate all employees before the closing of the deal.
What exactly are the Non-competition clauses? Many times buyers will hammer out an agreement with the seller, which limits the seller’s capability contend with them after settling in a similar business. If you decide to purchase a business, the last thing you want is the vendor opening a new shop just a few doors down from the original. If the seller is willing to incorporate a non-competitive stipulation at time closing, this possibility is eradicated.
Remember when considering non-competition covenants, they must not be overly restrictive, or you will not be able to enforce them. It could be a reasonable idea to limit another vendor from opening up a business that is similar to your own for 1 to 5 years following the closing of the deal, and due to these restrictions they must operate within a distance of 1 to 5 kilometers surrounding the present business location, depending on the type of business that is being
sold.
If the seller is unwilling to agree to such terms, it may be best to leave the deal for buying that business on the table and walk away. If you are thinking of buying a business that is already in existence, you need to find the time and effort to sit down with your local attorney. Over the long haul, it could possibly save you thousands of dollars and hours of time.
About the Author
Mark G is a writer and follower of developments in business sales market and broker industry. Visit his sites at canadian businesses for sale
and Quebec
businesses for sale.