Today’s business landscape is incredibly competitive, and sometimes buying an existing business can be an excellent investment opportunity – especially when it’s in a thriving state like Idaho.
That being said, it’s also crucial to understand the potential legal complications, perform sufficient due diligence, and identify potential pitfalls.
We’re going to look at some of the important things to consider before buying a business that someone else built. If you’re looking at possibly buying an existing Idaho business, partnering with our experienced business attorneys at Generations Law Group can help you get the guidance and advice you need to navigate the process successfully.
Evaluate the Type of Business and Its Market
The first thing you’ll need to consider, before getting into any purchase, is the type of business you want to buy.
You’ll need to understand the target market as well as identify areas with growth potential.
This means you’ll need to consider things like:
- Target customers
- Industry trends
- Market share
Legal Structure & Compliance
The next thing you should consider is the legal structure of the business you’re considering.
The legal structure will impact tax obligations, liabilities, registration requirements, and more. The most common structures are sole proprietorships, but there are also partnerships, LLCs, LPs, and various types of corporations. Depending on your short-term and long-term goals and your personal risk tolerance, having legal guidance for this stage can be invaluable.
Additionally, it’s important to make sure that the business you’re considering is in compliance with federal, state, and local regulations, and has no outstanding liens or similar penalties against it. To make sure the business is current, you may be required to acquire or re-acquire necessary permits, licenses, and regulatory approval from government agencies.
Working with an experienced business law firm like the Generations Law Group can help successfully navigate the complex process of ensuring compliance with a business you’re considering buying, no matter what size it is.
Financial Health & Total Valuation
When considering buying an existing business, one of the most important things to spend time assessing is the financial health of the business.
This is not only essential to determining its overall viability but also for making an informed estimate of its total value. This will require an in-depth review of a range of financial documents, including:
- Account statements
- Revenue and profitability trends
- Outstanding debts and liabilities
- Asset valuation
- Cash flow documents
- Tax returns
Working with an attorney and an accountant can help you gain a much more detailed understanding of the financial operations of the business. It can also help you identify potential risks or liabilities.
Perform Thorough Due Diligence
Due diligence is a vital step in any business or asset acquisition process and entails a comprehensive review of the details of the company.
Here are some thing to consider when reviewing the company you’d like to buy:
- Legal standing
- Financial records
- Employment agreements
- Intellectual property
- Contracts with suppliers and clients
- Real estate and lease agreements
This step is well-known to be incredibly important, but there are still many people that would prefer to skip some of these elements in the name of expediency. This is a massive risk to take and sometimes results in someone buying a business that’s in the middle of costly litigation or that otherwise has substantial legal or financial liabilities. Sometimes they buy a company with good financials but no contracts or clients.
Consult Our Experienced Business Attorneys At Generations Law Group
There’s a lot to consider before buying an existing Idaho business, and the process itself can be very complex. If you’re considering buying an existing business in Idaho, ensure that you make the process as smooth and risk-free as possible, by partnering with the Generations Law Group. Reach out today for a consultation.