Purchasing
a pre-existing business can be a way to avoid the issues involved with starting
a new business, but comes with its own unique issues. Several things should be
taken into consideration before deciding whether to buy a business. First, why
is the business being sold? Researching the history of the business can help to
determine its worth and any issues that will convey with the purchase such as bankruptcy,
mismanagement, lawsuits, or other bad occurrences that will affect its public
image. Second, are there any permits or licenses that are required to operate
the business and what rules and regulations govern its operation? And what is the business’s history with those
agencies? Again, the history may affect
your ability to keep or obtain such licenses or permits. Third, what exactly are you buying? Does the sale include only the business’s
assets? Or will you be purchasing its
liabilities as well? Are there leases,
contracts, or other continuing agreements that you will be purchasing and bound
by? It is important to be very specific
when identifying the all items being conveyed in the sale to reduce the
possibility of future disputes that might lead to litigation or which may
affect the value of the business being purchased.
Finally,
you should also consider a non-compete covenant with the previous owner. This can prevent them from opening a new
business that could compete with the one you just bought, keep them from hiring
their former employees away from you, and stop any use of their previous client
list, among other things.
Remember
to also take into account the cost of legal services needed to buy a business
when valuing the purchase or establishing a budget. And always consult an attorney at the
beginning of the process, as your legal costs will be considerably higher if
you wait to include legal counsel when you actually have a problem.
Written
by Eric Rupe / Maura Phelan (maura@lpvlaw.com)
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