Finding a business to purchase is difficult, but what happens after you have found one can be more challenging. Before the purchase of the business becomes final, there is a lot of due diligence that must be completed. Sometimes, research will reveal that a business might not be as good of a deal as it appears to be. If you are in the process of buying a business, here are some red flags to watch out for:
The income that the business owner has at the end of the fiscal year is an important red flag that you should not overlook. If the owner is unable to take a salary, that could be a sign that the business is struggling. Alternatively, if the owner is taking home a large salary, it could be a sign that there is another issue going on with the business.
The best way to handle the situation is to ask questions. If the owner has a large salary, find out why he or she is walking away from the business. Is there a legal issue that is looming that he or she is trying to avoid? If there is little or no salary, look further into the money the business brings in and how much is spent to operate it.
Equipment and Building
One of the most noticeable signs that a business might not be performing well is the condition of the building and its equipment. Ideally, you should have an inspector check the condition of the building to determine if there are any issues that have not been disclosed to you. You should also have the equipment closely inspected by a professional.
If the equipment and building are in disrepair, ask questions. Find out why are they in disrepair and determine what it will take to repair or update the building and equipment. If you are going to continue with the purchase, you and your attorney should negotiate with the business owner for some or all the cost of repairs.
While working towards the close of the sale, you and the business owner will exchange several documents. For instance, the owner should provide you with business tax returns for the last few years, existing contracts, property ownership documents, and employee and managerial staff documentation. If he or she is hesitant to provide those documents, there could be a problem.
If the owner does provide you with the documents needed, review them carefully with your attorney. He or she will be able to spot any potential signs of trouble that are contained within them. Check out a website like http://www.vanblk.com for more information and assistance.Share
29 August 2017
My name is Noni. When I was in college, I was hit by a car while crossing the street. My life was never in danger, but I did break a few bones and had a lot of huge medical bills. I was hoping I wouldn't have to get involved with an attorney, but unfortunately, it came down to that. I used a family friend who is an accident attorney to get some compensation. A few years later, I was hit while riding my bike and had to go through the same process. I suppose I'm lucky to be alive. And it's thanks to accident attorneys that I have been able to put my life back together. I started this blog as a way to let others know just how much lawyers can help you in certain situations.