Austin TX Business Law Blog

Friday, December 5, 2014

Purchasing a Business

For some, owning a business is a lifelong dream.  While starting a business from the ground up can be difficult, buying an existing business can make this goal much more attainable.  Purchasing a business is a serious matter which should not be taken lightly.  It is important to do the appropriate leg work in order to be successful in this type of transaction and with the purchased business in the future.

The first step is deciding which industry you are interested in and what type of business you want to operate.  For example, if you are interested in the technology field, do you want to manufacture a good or provide a service or both?  Narrowing down your area of interest will greatly increase the chances of finding a business that suits your needs.  After you decide on a specific business type, the search for available businesses can begin.  This can be a drawn out affair and it is best to utilize contacts within your network to assist you in finding a good fit.

Once you find an appropriate business for sale, you can then begin your investigation into the businesses circumstances.  You want to know everything you can about the business before you make an offer to purchase it. You should obtain all financial information, including balance sheets, tax returns, and any other financial reports or documents that may help you assess the business’s past, present and future financial situation.  You also want to inquire as to the business’s liabilities, including current contracts and agreements for things such as real property, service providers and employees.  You might also want to take a look at its legal history and inquire about its reputation to get an idea about where this business stands in the community.  Please note, this is not an all encompassing list of inquiries and that depending upon the business you are interested in, different concerns can and will arise.

It is important to valuate the business as you want to know how much the business is worth before making an offer or entering into any agreement.  So you should use one of the various methods for valuation, including looking at the business’s capitalized earnings or tangible assets.  You should seek the advice of an experienced business law attorney and accountant to assist you with this as it can be a confusing assessment. 

After you determine how much the business is worth, you should make an offer.  Once the offer is accepted, you will be asked to enter into a sales agreement or contract.  The sales contract is the document that will govern the transaction from start to finish and it is therefore important that it is carefully negotiated and drafted.  It is imperative that your consult with a business law attorney during this stage.

If you are considering the purchase or sale of an existing business, you should retain a seasoned attorney to guide you through the process. Call Austin, Texas business law attorney Sanjeev Kumar at (512)323-6060 to schedule a consultation today.

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