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By Sanjeev Kumar
Founding Attorney

What do I need to know before buying an existing business in Texas?

Starting a business from scratch can be challenging and comes with considerable risk.  Rather than building from the ground up, many entrepreneurs elect to buy an existing business.  Purchasing an existing business has several advantages, but it is critical that new business owners obtain the assistance of an experienced Texas business law attorney to protect their legal rights during the buying process.  Our Austin business law lawyer at The Kumar Law Firm PLLC discusses some important considerations you should be aware of when purchasing an existing business in the state.

Benefits and Drawbacks to Buying an Existing Business

There are several reasons why you might wish to consider buying an existing business instead of starting your one.  Building most businesses will take time, tying up your funds and costing you income for several months.  Buying a business can save you significant time, which may translate to increased profits.  Additionally, an existing business may come with a solid reputation within the community, a functioning staff, and inventory.  All of these things can be difficult to build on your own.  

On the other hand, buying an existing business can present challenges that entrepreneurs opening their own business might not face.  For starters, it can be difficult to accurately evaluate the current operations of the business.  Before the sale becomes final, it is critical that you perform your due diligence in inspecting the building and financials of your prospective business.

The Due Diligence Process for Buying a Texas Business

In your letter of intent (LOI), you will set out a period of time for your due diligence.  Your business law attorney will assist you with the following:

  • Requesting information and disclosures:  As a business buyer, you will need to make requests for information and disclosures of financials.  It is critical that you request all of the information you will need to make an informed purchase decision.
  • Research:  Your business lawyer will assist you in researching facts about the business.  You may work in conjunction with other professionals, like a CPA, to thoroughly assess the health of the business.
  • Negotiations:  With a complete understanding of the business you wish to buy, your lawyer will help you to compile a competitive bid that reflects the objective value of the business.

Buying a business is an intricate process.  With so much on the line, it is critical that you obtain the assistance of an experienced business law attorney who will help to ensure your new endeavor starts off with the best chance for success.  



About the Author
Sanjeev Kumar is the founder and principal at the Kumar Law Firm, which provides a wide range of legal services to entrepreneurs and business owners in the area of business & corporate law and intellectual property along with related areas of interest to clients such as business succession planning, wealth preservation through estate planning, and alternate dispute resolution.