Key points to Look When Buying a Business



Buying a business requires not only money and time but courage as well. If you are thinking of buying one of the shelf corp for sale, you now you must do your due diligence. Before you sign the transfer of ownership document, be on the lookout for the following signs of a bad deal.

Dishonest owner

It is hard to determine whether the owner is honest or dishonest. No one will come outright as being dishonest. However, it is the things they do like downplaying on the valuable information related to the business. One of the things you should look at is the discretionary income. The discretionary income is money that remains after the business expenses.

If the remains are consistent, it could be an indication that the discretionary income is declining. You should also find out what the owners plan to once he sells the business. If he is a dishonest person, he may decide to open another store next to yours and take his existing customers. You can avoid such a scenario from happening by having the owner sign a non-compete clause. You should also make sure that the owner signs a disclosure agreement. The agreement ensures that the seller provides vital information about the business, such as liens, lawsuits, problems with vendors, and employees.

Recent developments

When doing the due diligence, look for any recent developments. The owner could be selling the company because of the new competition. The owner could be selling due to new growth in the area.
Failing equipment

You will not get a good deal if the first thing you will do is replacing the outdated and old furniture. You can avoid such a scenario by checking to see if all the equipment is in good working condition. It will be costly to replace the items. The other thing you have to do is find out if the business owner owns the furniture outright. Make sure yo buy a business with new equipment. If not, you can adjust the purchase price accordingly.

Lagging on tax payment

One of the things you have to review is the business tax returns. Make sure the company is up to date with the tax payments. If not, you will have to pay all the tax arrears the company has accumulated over the years. You should also pay attention to the sales tax. It is especially true for a business-like restaurant. Most restaurants under-report their income to avoid paying high sales taxes. When you buy a business that under-reports its revenue, you will undergo a state audit. If the state finds that you owe the sales taxes, you will be forced to pay back all of it.

Financials are not right

When it comes to financial matters, you have to dig deep. It is the only way you will find out if there is something that is not right. Match the tax files with the internal financials. You should start doing the checking five years back. If the business is not willing to provide the tax information, then consider it a red flag.

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