Some business owners look to expand their operations quickly by buying an
existing business that is owned and operated by third parties. There are a number of advantages and disadvantages to this approach and careful evaluation must be given as to the value and quality of the assets you are buying.
There are two ways that you can buy a business. The most common method is to buy the business as opposed to the entity that owns the business. However, the actual entity that operates the business can also be purchased if the proper checks and balances are put in place by the parties. A great deal of care needs to be given to purchasing the entity that operates a business as distinct from the business itself. When you buy the entity that operates the business, you are buying all of the history — and potentially all of the problems — of that entity. For example, if the entity owes taxes and you buy the entity, you will inherit that tax burden. When you simply buy the business, you probably won’t inherit those issues as they are usually attached to the entity that operated the business in the past.
Before you buy a business, you need to carry out a great deal of due diligence to ensure that you are fully informed about the purchase. This is particularly true if you’re also buying the entity that operates the business. A thorough examination of the history of both the business and the entity – with the help of your lawyer and accountant — is needed to ensure that all of your concerns are addressed. You also need to consult closely with your accountant to ensure that the books and records of the business or entity are accurate and up-to-date.
Have an Enquiry?
Select your desired option below to share a direct link to this page.
Your friends or family will thank you later.