- Is this company in a business that you know and understand? If not,
- First work as an employee; and/or
- Find a mentor; or
- Negotiate with the seller and include the purchase agreement that current owner will stay on as an employee and mentor for at least six months.
- Can you manage this type of business?
- Know all government regulations: state, local and federal
- Know all taxes – what to pay and when
- Do you have a team of professionals that can help you? You will need:
- Accountant – taxes and financials
- Lawyer – written agreements and business formation
- Business Banker – set up business accounts and help you with loans as needed.
- Insurance Agent – depends on the type of business but can be invaluable to have the correct coverage
- Consultant – likely optional and depending on the type of business.
- Verify the Health of Business you are considering. Business is a separate entity – like a buying a cow. Is it healthy or sick? The only way to know is by reviewing the business books AND tax returns, which both must add up to and match. If they do not, that is a red flag. If they explain the discrepancies away by saying that they are due to unreported cash, you are not dealing with an honest person and you should walk away because you will never know the true state of the business
If the seller refuses to show you the books, even after you have signed a letter of intent and maybe pay earnest money- that is a red flag and you need to walk away. Have your accountant review the both the books and tax returns. Do not cut corners here – being cheap up front will costs in the end.
If the business is not healthy, you need to consider whether or not you have the ability and financial resources to turn it around. Your accountant, business consultant and maybe even your banker can assist you in analyzing whether or not this business can made healthy, what it would take to accomplish that goal. With that information, you can negotiate down the price to consider the investment needed to make it a viable business.
- Can you manage the financials of having a business? The business being its own entity needs to have regular cash flow – hopefully which it itself with generate. You cannot just take out from business and not reinvest. Or in other words, feed the cow that provides you with income. If due to other circumstances, you know you will taking every penny you can out of the business, then you will not be able to make the business a success.
- Physical Items that are part of the sale of the business – Equipment, Fixtures, Inventory, Customer lists, Vendor Contracts
- Purchase of a business often includes equipment and fixtures. Remember that all of it used. As for equipment and vehicles, ask for the repair records and to see the warranties on all of the equipment. A well run business should be able to pull those out for you, while a poorly run business may not be able to find those records. Be prepared to replace some of the equipment within the first year, maybe even first months after your acquire the business.
- Inventory – if the business you are considering purchasing is retail, then inventory will also be part of the deal. You will need a dated inventory as close as possible to the day that you will be taking over the business. The day you take over the business, conduct an inventory and compare. Part of your purchase and sale agreement should include credit if there is a significant discrepancy between that of the Agreement and that when you take over.
- Vendor Agreements – If you as the new owner, you are going to be bound by the agreements of the previous owner, review them and better yet, have your attorney review them.
- Be disciplined. Do not become emotionally attached. Use your team of professionals to keep you on track and objective. Make sure the members of your team have completed their analysis before your finalize the purchase.
- Financing the Purchase
- Owner Financed? Usually this type of sale is secured with promissory note and the equipment and fixtures with UCC filings which are recorded with the County.
- Small Business Administration Loan – Your banker can assist you with the application.
- Pros – you get financing.
- Cons – if they are difficulties, the terms will be difficult to renegotiate.
- What Type of Entity will your business be?
- Sole Proprietorship – simplest but owners are the most exposed to personal liability.
- Partnership – need a written Partnership Agreement
- Corporation which will be require Articles of Formation and By Laws
- LLC or PLLC limited liability corporation, or professional limited liability corporation
- C- Corporation which pages corporate tax and everything you pay yourself will be subject to income tax
- S-Corporation which are Pass-through Corporations but are easier to pierce than C-Corporation to open owners to liability.
- With whom you go into business with also requires a clear eye, be as partners or as shareholders. There needs to be complete honesty so ask for financial statements or tax filings. Remember business partnerships are like marriages, you need to have similar philosophies and outlooks and you need to have good communication to make the business a success. If there is a history of drug or alcohol abuse, or if there are convictions of crimes of dishonesty, proceed with all caution and do not hesitate to put safeguards in your partnership or shareholders agreement.
I was injured about seven months and the treatment I was receiving was helping but lately I have plateaued and I am not getting any better. Should I change treatment?
Answer: If you are not getting any better, you are not doing yourself any favors to keep doing something that is not helping. If you have a personal injury claim, you will find that unhelpful treatment can negatively impact your claim. First talk to your doctor about your concerns. If you are not satisfied, do not hesitate to make a switch and try something new. It could make a difference in your recovery. The sooner you can return to pre-collision condition, the sooner you can put the injury behind you.
I was in a car accident and I have PIP through my car insurance, but Medicare paid for my emergency room visit and all other charges that day. Should I do anything?
Answer: PIP is primary and is responsible for those charges. Get copies of the bills and send them to the PIP adjuster with a demand that they pay those bills. The hospital and physicians will then reimburse Medicare.
I was in a car accident and it was clearly not my fault. The police came and investigated and gave the other person a ticket. However, I am not insured and the insurance company of the person how hit me will not return my calls.
Answer: Unfortunately you need legal help. If you are injured, consult and hire a personal injury attorney who can help get the insurance company to realize that they are putting their insured at risk.
If you are not injured and the damage to your vehicle is less than $5,000, you can sue the person who hit you in Small Claims Court. You will need to show that you did not cause the collision and that the other person is responsible. You will also need to show how much it will cost to fix your vehicle. If you also need to show how long it will take to repair your car and how much a rental will cost. The insurance company may respond once their insured is served. If not, they may try to send an attorney to same claims which if that occurs, you need to remind the judge that lawyers are not allowed in Small Claims.