Buying a Business
For a business person looking to start a new business or expand an existing one, buying an existing business is often a good option.
An existing business has an established location, suppliers, product or service offerings and customers. All of these can be time-consuming and expensive to undertake.
A business startup will usually have a number of other hurdles to overcome, as well, such as lease improvements, buying fixtures and equipment, advertising and promotion build a customer base and other such items, depending on the type of business being setup.
There are also regulatory factors to consider, depending again on the type of business being started.
That being said, however, as with any purchase, due diligence is required. You must do your homework.
I strongly recommend having a discussion with your lawyer and your accountant before you begin to investigate buying a specific existing business.
Discuss topics such as the purchase of assets versus purchase of shares, liabilities, existing contracts with suppliers and customers, considerations you should be aware of regarding any premises leases.
How will the value of the business be allocated between assets and goodwill? Should the purchase be through a corporation or some other form of ownership. What are the taxation considerations?
Are you going to require financing to buy a business? Speak with a business accounts banker, as well as other finance professionals such as Community Futures, the Business Development Bank (BDC) and others. Get advice from municipal authorities regarding any zoning requirements that may apply and contact any provincial or federal licencing authorities that may be involved.
What is the business’ reputation among it’s customers? Among the general public? What is the current competition for business within a reasonable trading area?
Many of these are questions you would need to consider if you were to start a business from scratch, however, it is wise not to overlook any of them.
Once you have decided to buy a business, have your lawyer and accountant review the contract of purchase with you before it becomes binding. If you are putting a deposit on a purchase, that deposit should be paid into a trust account, not directly to the vendor.
As always, we are happy to meet with you to discuss these and any other considerations or concerns you may have.