Buying an existing business is a big decision, so it’s important to go about it in the right way. Before buying a business, you should conduct due diligence — the process of gathering information about the business on offer. This information is vital in helping you make wise commercial decisions. Consider why the vendor is selling the business and try to learn about the current customer base of the business and any contracts with suppliers.
Other important points to look out for are the ownership of key assets and whether the business has any ongoing liabilities. You should also ask about any past and current disputes relating to the business. If you’re planning to make an offer to purchase a business, it’s a good idea to seek professional assistance to confirm that the business has been valued correctly.
LegalVision’s team of specialist lawyers can provide guidance at all stages of buying a business, from due diligence to settlement. An experienced lawyer should be able to keep costs low and your deal moving forward efficiently. Your lawyer should also identify issues that may affect your business sales, like whether you need to transfer a lease and a business name as part of the transaction.
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5 Things You Need to Know About Buying a Business
1Buying a business can be an exciting commercial opportunity. However, among the excitement, it is essential to ensure that your interests are protected in the transaction. Just like buying a car, you might not know what’s really “under the hood” until you’re on the ground as the new owner of the business.
2The first way to protect yourself as an interested buyer is to conduct a thorough investigation of the business. This process is known as due diligence and can involve going through the financial statements of the business with your accountant, interviewing employees and engaging a lawyer to review the important contracts of the business.
3Once you’ve decided to purchase the business, the seller’s lawyer will generally prepare the first draft of the sale of business agreement. Your lawyer will review the document and take you through the important terms. The lawyers will often then negotiate to reach an agreement that satisfies both parties. As a purchaser, one of the key points your lawyer should look out for is making sure the agreement protects your interests if the business turns out not to be as successful as the seller has promised.
4If the business you are buying depends heavily on the involvement of key personnel, you should consider asking those employees to stay on after the sale has been completed. Another option is to insist on a training period, during which the seller will share knowledge about all the tasks necessary to operate the business successfully. Training periods of up to a month are common.
5From a buyer’s perspective, it is also critical that the sale of business agreement includes a well-drafted non-compete clause. A non-compete clause is a type of “restrictive covenant” that prevents the vendor from running a competing business after the sale goes through. Some non-compete clauses will not be upheld by the courts, so you need a lawyer with experience in business sales to help define a non-compete clause that will be reasonable in your circumstances.