How do you purchase an operating business?

Question

What are the steps to follow and the information you need to make your decision?

Answer 1

1. You kneed to know the revenues: Sales records for prior ____ years, months, weeks; Sales tax returns; records of all other income sources; prior year's income tax returns
2. You need to know expenses: Rent, utilities, payrolls, advertising, etc & get actual records.
3. Need a list of assets & need to know who owns the assets (or check terms of equipment leases; promissory notes)
4. Must confirm all accounts receivable & payable.
5. Need copy of leases & contracts (incl franchisee) to see how long they run & any limitations on transfers.
6. Need copies of all business & special (like liquor) licenses & confirm they are transferable
7. Need to know who actually owns the business -- Corporation, partnership, & who the other owners are. If corp. need to see the corporate books & records.
8. Need to know whether there are any bank or other loans outstanding -- check UCC filings & mortgages recorded on property; get payoff & estoppel letters from lenders.
9. If there is real property included, you need all the usual items in a real estate contract.
10. You need a period of time & written authorizations to let you confirm all the seller's representations.

Many sellers will not let you have this info until you sign a contract & non-disclosure agreement put down some money.
Either a broker, or preferably your attorney should prepare such a contract so you can withdraw without penalty if you decide the deal is not for you. You cannot trust a business broker to protect a buyer's interests; they represent the seller & only get paid if the deal closes. Anyone who buys a going business without having a lawyer review or prepare the purchase contract and review the closing documents is a fool asking to be separated from his money.

Answer 2

Profitability and Cost.

Do the math, if the profit will make payments on the business, provide salaries for yourself and your employees, and provide for longterm business growth then it may be something to consider.

Why are they selling it? I've seen many businesses that people purchase as the owner retires. In these cases customer loyalty is a very important part of the transfer. It may require you maintains some of the old owner's business practices..

Answer 3

Basically, you buy over 100% of the share capital if it is a sole proprietorship or a private limited company. If its a public listed company the takeover rules will be different according to the relevant authority for that country.

Prior to buying, you will need to engage qualified accountants to do a due-diligence to review the worth and liabilities of the business you are taking over.

Answer 4

Go to http://www.score.org/ to find the nearest SCORE chapter. Contact them to arrange for a free one on one meeting with a SCORE counselor.

SCORE is a nonprofit organization. They provide a public service by offering small business advice and training. .

SCORE's 10,500 volunteers have more than 600 business skills. Volunteers share their wisdom and lessons learned in business. The volunteers are working/retired business owners, executives and corporate leaders.

Answer 5

Are you paying money or getting a private loan. in case you're paying money out of your pocket, you stumble on a Coin-Op on the industry, you hire an accountant to look on the books and be certain what it truly is worth after which you purchase it. in case you will get a private loan, you nonetheless would desire to hire the accountant to be certain the value of the employer, determine you will desire a minimum of 30% down, and then write a employer plan to recent to the lender.

Answer 6

i don't know myself, sorry. but this doesn't sound like a good question to ask on yahoo. i'd probably get advice about buying a business, elsewhere.