5 Things To Look Out For When Buying A Business

Here at Sacramento Business Broker, we are devoted to helping our clients with the buying and selling of all kinds of businesses. If you want the best advice, check out this guide below to the top 5 things you should look out for when buying a business. 

Buying a business can be stressful but here are some handy tips to keep in mind when browsing for your new business. Take a look and we hope you find the advice below insightful and helpful. 

• Ask About Taxes

Taxes  – they are a pain in everyone’s side but when thinking about buying a business, it’s super important that you ask questions regarding the taxes the business deals with. This includes sales and payroll taxes as it’s very likely that, as the potential future owner of the business, you will have to handle these taxes yourself. 

This is especially true if the business owner has failed to pay their taxes before selling the business to you. If so, then the tax authority will come after you as the current owner. 

Before making a purchase, request a clearance letter from the state tax authority as proof that the seller is up to date with their taxes. This will help give you peace of mind knowing that it’s one less issue you will have to deal with further down the line. 

• Learn About The Business Outlook And Projection

You want to buy a business that is going to help you make some profit through good revenue, so you will want to look for what kind of outlook the business currently has. 

This means that you need to do your research regarding the business before you buy it. For example, what competitors does it have in the area, how satisfied are its customers, and what are the logistics of running this kind of business? 

It’s important to get a good understanding of the business and its projected growth before you purchase. This way, you can make the necessary changes to get the business on track, keep the aspects that are working well for it, or even choose not to buy the business at all. 

To do this, you need to do your own research – ask the seller, local realtors, and other local businesses, suppliers, the chamber of commerce, the customers. 

• Ask About Licenses And Permits

You can get into a lot of legal trouble if you purchase and run a business that does not have the necessary licenses and permits it needs to operate. Even if the responsibility was rightly with the previous owner, it is now your responsibility to make sure that your new business is legally allowed to operate. 

Before you purchase a business, ask about what licenses and permits it needs to operate, how often they need to be updated and renewed, and how long they will last into your ownership. 

• Take Stock Of The Assets 

When you buy a business, you need to know what exactly you are buying and what is included in the transaction. As a result, you need a copy of the assets specification sheet which documents all the assets that will be transferred to your ownership with the purchase. 

Assets can include things like intellectual property, branding, copyrighted trademarks and patents, property, and more. You should also check how intellectual property is protected in your local state to help protect your business’s assets and save yourself a lot of legal issues later. 

• Ask About Prepaid Expenses

Surprise costs are one of the most common issues business owners face after recently purchasing a new business. While taxes are one of them, there are also plenty of different expenses which fall under a different category. 

For example, marketing expenses – how much is a business paying for certain ads every year? What about any deposits?

Some sellers will ask to be reimbursed for these if they have not gotten their full worth out of the expense, and it will fall down to you to reimburse them for these costs. 

Final Thoughts

There are many different things you need to keep in mind when buying a new business, but there are some that are often overlooked or forgotten about until it’s too late. 

So, look out for any hidden costs such as expenses, permits, licenses, or taxes which can cause you a lot of trouble and hassle if you are caught out! Don’t forget that you should also take stock of all the assets you are purchasing with the business and the projected outlook for the business itself.