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What to Check Before You Buy a Business for Sale

Buying a business is a wonderful opportunity to build your wealth and enjoy financial freedom. However, if you choose the wrong business, it could be a disaster. That is why you should ask for the right paperwork and information to unearth hidden issues. 

The current business owner may ask you to sign a confidentiality agreement so that you use the information that is revealed just to investigate the business. You will be able to share the details with your lawyer as well as your accountant Redlands QLD. 

Check the Financial Health of the Business

When you are interested in a business for sale in Redlands, the first thing that you should check is the financial state of the business. Ask the business owner for the current balance sheet, audited financial statements, profit and loss statements for the last five years, tax returns for the last five years, and accounts receivable and payable. 

Also, make sure that you ask for the debt. That will enable you to ascertain whether the creditors have a lien on the assets of the business. If there are liens, they will be filed at the public office. If the business does not repay the creditors, the liens enable them to seize the assets and sell them to recover the money that the business owes. This can be done even if the business is sold and acquires a new owner. 

Inspect the Physical Assets

When you want to buy a business, it is also possible to purchase physical assets, like inventory and equipment. Inspect the assets with care so that they are in good work condition. You can get an expert to check the assets. 

If the equipment is leased, check the agreement for the terms and find out whether you will be able to take the equipment over when you purchase the business. When it comes to the inventory, check the expiration date to ensure that you can still sell it. Otherwise, you will end up paying for something that you cannot sell. 

Find Out the Legal Status of the Business

Any financial planner Cleveland will tell you that finding out the legal status of a business is imperative before you purchase it. Usually, a business can be an LLC or corporation. You have the option of either buying the assets or the business entity that owns the assets. Remember, purchasing assets is much better than buying the entity. 

In case you intend to buy the business entity, you need to check the paperwork with care. Find out that it is properly created and has all the documentation, such as operating agreements, bylaws, and resolutions. Also, the owner should have the legal right to sell it. Ensure there are no lawsuits against the business. 

In Conclusion

When you want to buy a business for sale in Redlands, your accountant Birkdale can assist you with most of the things. However, it is a good idea to also bring a lawyer on board. 

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