BUYING A BUSINESS
LEGAL REQUIREMENTS
Buying a business is one of the biggest commitments you can make in your life. Business ownership involves an incredible contribution of time, sweat and money, and you constantly need to balance various demands and risks to ensure growth.
A key component in any successful business is making sure you follow the right process before getting started. Below are the five key steps you should take when you are about to buy a business:
1. Do Your Research
The first step is to properly research each prospective business to get a very clear sense of the business’ strengths and weaknesses and what it is exactly you will be buying. In other words, kick the tires and see what is under the hood.
For example, you should request the company’s:
Financial statements
Lists of customers and suppliers
List of employees, including a breakdown of salaries and years of service
Details of any major contracts necessary for the operation of the business, including the lease of any premises;
List of all equipment and assets of the business
Any related debts, licenses and liabilities.
Before sharing this sort of detailed information with you, the seller may insist that you sign a non disclosure agreement to prevent you from using it for any purpose other than buying the business. Any documents you are asked to sign at this early stage should be shown to a lawyer to ensure you are not making any unwise legal commitments.
When reviewing the content, use the available government databases to verify any information the information provided is correct. These searches will show, for example, whether there are any liens on the business assets; whether there are unpaid taxes; whether there are ongoing lawsuits or human rights complaints; and whether certain buildings or motor vehicles are in fact owned by the seller.