You Need to Watch Out for These 5 Things When You Buy a Business | Business Broker in Grapevine, TX
There are many opportunities for you to buy a business in Grapevine, TX. You may have an acquaintance who is running their business successfully and needs someone to take over the reins. This might be for a number of reasons.
For instance, the current business owner may be nearing retirement and needs a fresh and agile manager to manage the business. The owner may even want to get a good deal for the business he had built from scratch. Or she/he may have the entrepreneurial spark and wants to feel that rush of excitement they get from developing a new business from the ground up. They may just want to cash in the business to pursue their other interests.
But what do you need to look for when you buy a business in Grapevine, TX? Here are some of those all important things that you need to keep on your radar when buying a business.
1. Make Inquiries about Tax
There are many situations where you buy a business’s assets only to find out that the previous owner owed sales payrolls and many other types of business tax. The tax authorities come to you for the collection of these taxes.
Inquire from the business’s employees about the status of the payroll services that the previous owner was using. Find out if he was up-to-date with his payments or not. You can go the extra mile to save yourself heaps of tax problems in the future. Request a clearance letter for the tax authorities. Make sure to keep them informed of the previous owner’s tax situation when you buy a business in Grapevine, TX.
2. Ask if you can take on the existing seller’s lease
This is an obvious given if the seller has a lease on his business premises. Ask about when the lease’s tenure expires, and if his landlord is willing to transfer the lease without changes to you. If the lease has a couple of years on it, it is advisable if you negotiate a new lease with a term of 5 years or more when you buy a business in Grapevine, TX.
You have to be wary of the security deposit on the lease as well. The landlord may have this deposit on the seller. The seller may even want you to take this deposit off his shoulders along with his business’s assets. Make sure that when you buy a business in Grapevine, TX, that the security deposit is mentioned on paper in the business’s total purchase price.
3. Get an Intent letter in Writing
Knowing what you will get in a business deal is of crucial importance. That’s why it is important to have an intent letter. This is a 2–3-page written agreement between you and the seller when you buy a business in Grapevine, TX.
This intent letter is a very important, though not legally binding, agreement which entails the details of the purchase including the business price, the constituents of this price, how the payment will be made and so on.
This can greatly ease the process of formal legally binding sales documentation when you buy a business in Grapevine, TX. It greatly reduces the need for redrafting the legal sales contract. This letter aids in smoothing out many of the rough edges of the business before ownership is fully transferred.
4. Protect yourself through indemnity
One can never be too careful when they buy a business in Grapevine, TX. Your attorneys do their “worst” in analyzing every facet of the business’s books to make sure everything’s good to go. Even then, there might be something that they overlook when may be the potential cause of heartache in the future.
The seller may or may not have done something through the years of operating the business, which may put you in a tight spot. Indemnity goes both ways. Both parties should be willing to sign an indemnity to defend their interests if either suggests one.
Your indemnity will allow you to be safe from unnecessary expenses of solicitation and judgment if you are implicated in a lawsuit due to a fault of the seller’s. The seller will pay for these expenses. Likewise, after closing the sale, the seller is implicated due to a fault of yours, you will bear the brunt of the court fees and not the seller.
5. Build your rapport with existing employees
Employees are the heart of the business so make sure to give them an incentive to stay in when you buy a business in Grapevine, TX. Employees of a business typically know the ins-and-outs of the business operations. If you’re inexperienced in the field your business is in, employees may prove to be your most important and valuable asset.
Employees who have been in the business since the beginning know how the business machinery operates. If you buy a service oriented business, these employees are the ones that customers know best because they meet with these customers on a daily basis.
To keep yourself safe, have a clause in the sale agreement that says that you and the buyer will announce the sale, two days before closing. There might be employees who pledge their allegiance to the previous owner and might quit, prompting others to do the same.
As the buyer, you should meet the all the employees of the business and see whether they are willing to stay on after the ownership is transferred to you. Add a clause that you can choose to walk away before closing, if the circumstances show that important employees are not willing to stay on long enough for you to learn the business well enough from them.
Where brokers can help
Brokers can help you get the best financial business deal. With their experience, they allow you to make informed decisions when you buy a business in Grapevine, TX.
If you have a business in mind that you want to buy or are interested in beginning your search for one, why not let Kirksey Business Brokers help you in your search. Call us on 817-637-1508 for further information.