Buying An Existing Business: Tips That Can Help You Avoid Serious Mistakes

Have you always wanted to run your own business? If a prime opportunity to buy an existing business comes your way, it may seem like a deal that's too good to pass up.

Buying an existing business in which you have an interest is a great way to enjoy the benefits of owning your own company without the hassle of establishing it from scratch. However, you want to go into the deal with your eyes wide open. Here are some tips that can help you avoid significant legal complications in the future.

1. Consider buying the business's assets, not the business itself.

Many businesses—whether they're a retail store, an import-export business, or a local restaurant and bar—operate under the mantle of a corporate identity. If so, it's usually in your best interest to make certain that you're buying the business's assets, not the actual company. 

This has tax benefits that you can better evaluate with a financial advisor's help. Primarily, you will lower your tax basis because the assets you buy will be valued less than what the former owner paid for them. You also gain a legal advantage because you won't be taking on any outstanding debts or lawsuits that are pending against the business for any reason.

2. Ask to see the tax records for the business.

Buying only the assets of a business won't protect you against tax obligations if the current owner is behind on payroll, sales, or use taxes. Most of the time, this should not be an issue. However, if the owner is selling because the business has seen better days, you want to make certain you aren't assuming a huge liability.

3. Find out if any of the employees are willing to stick around.

Seasoned employees are worth their weight in gold for a small business. They often inspire customer loyalty and can help guide a business that's been sold to new owners through its transition phase with ease. Make your offer to purchase contingent on the expressed willingness of key employees to stay on after the sale.

4. Make sure that you can assume the company's lease, if there is one.

If you're buying the building the business is in, that's fantastic. If the business has a lease, however, you want to make certain that you won't be forced out of the prime location you want to keep. Even if the lease is assumable, you may want to negotiate an extension.

When you're investing in your future, it's important to get all of the details of your purchase correct. A business litigation attorney can help you negotiate the most favorable terms.

For more information, contact a business litigation attorney.