Buying an Existing Business - What You Should Know

 Posted on March 17, 2017 in DuPage County Business Law Attorney

Purchasing an existing business can reduce the cost and stress that often accompanies the start-up of a business. You do not have to hire employees, create a brand or logo, or even purchase equipment. Instead, you can focus on earning immediate capital. However, there are some potential drawbacks to buying an existing business. The following can help you understand these risks and how to mitigate against them.

Understand the Potential Risks

Before purchasing a business, it is crucial that you understand the possible risks - not just for purchasing a business, in general, but for the specific business you are looking at buying. A few things to consider might include:

• Cost of taking over the business;
• Debts of the business;
• Initial business concept;
• Current customer base;
• Company brand;
• Company rating;
• Zoning requirements;
• Environmental concerns;
• Required licensing and permits;
• Potential return on investment;
• Tangible and intangible assets; and
• Any other issues specific to the business you plan to purchase.

Failure to consider any of these issues could result in a financial loss, company loss, or a failure to receive a return on your investment. You could also be at risk for collection actions from the company's previous creditors and/or legal implications on previous tax liabilities, breaches of contract, or failure to comply with local or federal law.

Employees of the company could also pose a risk to the company after purchase. Some examples might include harassment issues, a lack of understanding or willingness to meet employment expectations, and financial fraud. These issues are often present prior to the purchase, so spending time at the company can help you get a feel for what might go on behind the scenes when no one is looking.

Mitigating the Risks with Due Diligence and Experienced Assistance

Due diligence, or the process of vetting a business, can help you mitigate the possible risks of purchasing a poor investment. Unfortunately, this process is not always easy. There are many issues and aspects to consider. Further, you may not be fully aware of all the zoning laws, employment laws, and/or environmental laws that are applicable to the business. This is why every investor should seek the assistance of an experienced attorney prior to purchasing a new business.

With more than 40 years of experience Stock, Carlson & Asso. LLC can help you navigate the due diligence process, assist you throughout the entire purchase, and help to reduce the risk of a poor investment. Call 630-665-2500 and schedule a consultation with our DuPage County business law attorneys to learn more.

Source:

https://www.sba.gov/starting-business/how-start-business/business-types/buying-existing-businesses