Friday, August 14, 2015

Purchasing a Business: What’s important and what you should know before buying a business in Texas?

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 (