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Risks of buying an established business

On Behalf of | Sep 30, 2016 | Buying & Selling Businesses |

Many North Carolina residents would like to own a company but lack the entrepreneurial spirit to start one from scratch. Instead, they consider buying an existing one. While this can be appealing, it is not without risk.

Purchasing an existing business will require extensive due diligence. There are some disadvantages as well. One is that it may be more expensive to buy an existing business compared to starting a new one. The buyer must pay for the company brand, the customer base, the initial business concept and various other things that have been accomplished.

It is also important for buyers to find out if the business carries any large debts, and consider other important issues, such as local, state and federal permits and licenses that must be acquired prior to operating the business. They should also look into zoning requirements pertaining to the business location. In some cases, the city or town may have changed the zoning requirements. Then there are environmental issues that could be associated with the existing business property. Therefore, the buyer might want to look into the local regulations regarding the issue to ensure the business is in full compliance.

While purchasing business may appear attractive, there may be some underlying issues hidden from the buyer, which could lead to large financial losses or liability issues. Those who thinking about buying an established business might benefit from consulting a knowledgeable business lawyer who could investigate the business’s background, find out if there are any liens or tax liabilities associated with the business property, investigate the property’s deed and ensure there are no other existing complications.

Source: Small Business Administration, “Buying Existing Businesses”, Sept. 28, 2016