If you get it right, buying a business can be a smart financial decision that comes with a multitude of benefits. You will have an immediate cash flow, an established customer base, and there may already be a marketing plan in place. However, purchasing an existing enterprise is a complex process, and one small mistake could lead to legal problems and financial turmoil.
At Solomon Richman P.C., our corporate attorneys can help you avoid the most common pitfalls of purchasing a pre-existing business such as:
- Failing to investigate the business being purchased;
- Not considering logistics problems; and
- Failing to outline the terms of the purchase in detail.
If you are planning to purchase a business in New York, turn to Solomon Richman P.C. for legal guidance. A corporate attorney in Long Island will evaluate the investment to determine if it is a smart transaction. Our legal team will help you mitigate potential liability and draft the purchase and sale agreements so you avoid legal issues down the line. Call 516-437-6443 to schedule a free consultation.
Let’s take a closer look at three mistakes to avoid when purchasing a pre-existing business:
- Failing to Investigate the Business Being Purchased
A thorough investigation is necessary before you commit to purchasing any business. This is true whether you are buying the business directly from the owner or through a broker.
The business lawyers at Solomon Richman P.C. will evaluate the company you plan to purchase and answer questions such as:
- Why is the current owner selling the business?
- What is the monetary value of the business?
- What is the intrinsic value associated with the business due to goodwill?
- Has there been a lawsuit filed against the company?
- Are there any potential compliance issues?
- Not Considering Logistics Problems
There is a myriad of logistics issues to consider before purchasing a business. Even if the enterprise seems profitable and established, it is important to examine potential logistics problems such as:
- If the buyer will have to create new bank accounts;
- How the seller will transfer utilities; and
- If there is a landlord, he or she may have to approve the transfer of the lease.
- Failing to Outline the Terms of the Purchase in Detail
According to AllBusiness.com, a minor error when drafting purchase and sale agreements can lead to major problems down the line. The terms of your purchase may need to include language that explains:
- Whether the current owner is not allowed to establish a competitive business venture;
- The current owner’s and successor owner’s responsibilities to the current landlord, if applicable;
- The nature of any open contracts with clients and vendors;
- What will happen to unpaid invoices; and
- The employment status of existing employees.
The purchase and sale agreements should also outline what will happen to any patents, intellectual property and inventory of the business.
If you are planning to purchase a business in New York, contact Solomon Richman P.C. A business lawyer in Long Island will help you overcome the legal and financial challenges of buying a pre-existing business. Call 516-437-6443 today to schedule a free consultation.