5 Must-Know Tips for Successfully Buying a Business in Orlando, FL
Did you realize there are over 27 million small businesses in the United States? For most people, owning a business is something they have dreamed of for a long time. Being your own boss puts you in the driver’s seat and allows you to take control of your financial destiny.
In some cases, a person will accomplish all of the goals they have set for their business and will want to start a new adventure. Luckily, there is a large portion of the population that has an interest in buying pre-existing businesses. If you are thinking of buying a business, you need to weigh a number of options before settling on a company to invest in.
Often times, a newcomer to the world of small business will get anxious when presented with a great investment opportunity. Being too eager can lead to you paying more for a business that may not be worth it.
Are you trying to buy a business and need a bit of guidance? If so, check out the following tips to make buying a business easier.
1. Doing Something You Love Won’t Feel Like Work
Before you start the search for a business to purchase, you need to think about what your passions are. Trying to invest in a business that performs a service or offers a product you aren’t passionate about is a recipe for disaster. The less you know about what a particular business does, the harder you will find it to run this company efficiently.
Ideally, you want to choose a business in an industry you are already familiar with. For instance, if you have experience doing electrical repairs on the side for years, buying a business that offers these services is a good idea.
Not only will this familiarity help you hit the ground running, it can also help you assess whether the business in question is worth the money. The worst mistake you can make when buying a business is settling on the first deal you find. Be sure to take the time to weigh all of your options before making this important decision.
2. Remember You Are Buying Assets Not the Business
Is the business you are trying to purchase classified as an LLC or a corporation? If so, you need to avoid buying stock in the company. Buying the assets the company in question has and starting your own company with them is a good idea.
The main reason to avoid buying stock in a company is that it will help you get better treatment from the IRS. The value of the assets you buy will be what you paid for them and not a stock price that was set many years ago.
Also, if the business owes money, they can be sued and you may be liable if you are a stockholder. Instead of getting caught up in these headaches, buy assets and not stocks.
3. Get a Look at the Sales and Payroll Taxes
Most people fail to realize how much work goes into vetting a business before purchase. If you do not cover all of the bases before making this purchase, it could come back to haunt you. During the initial conversations with a business owner, be sure they know how adamant you are about viewing the sales and payroll taxes they have paid.
Even if all you buy is a company’s assets, you could be held liable for any overdue or unpaid sales and payroll taxes. Often times, a business owner will use a payroll service to keep up with these taxes.
This means they should have no problem producing the documentation you are after. If the business owner seems evasive when pressed for this information, you may need to avoid buying their company. The last thing you want is to be in the hole due to large tax bills from the previous owner.
4. Can You Assume the Seller’s Lease?
Businesses who specialize in selling goods to the general public can make a lot of money. If you are looking at buying a retail-based business with a brick and mortar location, assuming their existing lease is important. Consumers are creatures of habit, which means they get used to a business being in a certain location.
Buying a successful retail business and moving to a new location can be problematic. This is why talking with the current owner to see about the possibility of assuming their existing lease is crucial.
You need to find out how long a business has left on their existing lease and whether or not the existing landlord is willing to play ball. Ironing out all of these details beforehand can make the business buying process less stressful.
5. Buying a Business Requires a Letter of Intent
You have probably heard the term “letter of intent” thrown around, but you may be unsure about its meaning. A letter of intent is a document that spells out vital terms and conditions of a sale. This document will include everything from the purchase price to a list of the assets being sold.
These documents are considered non-binding, but you will still need to invest time in drafting your letter of intent. Often times, this document is used as a guideline by lawyers when drafting legally binding documents for the sale of a business.
With a letter of intent in place, you can avoid negotiating the terms of the purchase and the drafting of legally binding paperwork at the same time.
Don’t Take on This Process Alone
As you clearly see, buying a business can be a very complicated process. This is why working with professionals in both the legal and real estate industries is a good idea.
Are you looking for a comprehensive list of businesses for sale in your area? If so, contact us now to find out how we can help.