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Performing due diligence when buying a company

| Mar 21, 2019 | Buying & Selling Businesses |

Entrepreneurs in North Carolina who are looking to become business owners may consider buying an existing company. However, prior to doing so, it is important to complete due diligence and ensure that the purchase will be worthwhile. The first step in that process is for an individual to consider why he or she is interested in being a business owner. Ultimately, that person is responsible for overseeing every task related to operating a company.

When it comes time to look for a company to purchase, it is important to know as much about it as possible. Prospective buyers should learn more about the company’s history, if it generates revenue throughout the year and if it generates a profit. It is also critical to ask for tax returns and other audited statements to verify when the current owner is claiming.

If there are issues with a tax statement, there could be other issues that haven’t been disclosed yet either. Prospective buyers should ask who the company’s customers are and how it markets to those customers. This could make it easier to understand how the company makes money and if there are ways of making marketing and customer acquisition efforts more efficient and effective. Finally, be sure to ask about any legal issues or other liabilities the company may have.

Those who are seeking to purchase a business will likely need help doing so. Assistance may come from an accountant, business broker or an attorney. In some cases, multiple parties will work together as a team when vetting a potential business transaction. Individuals may benefit from having an attorney review a purchase agreement before it becomes legally binding. Once the transaction closes, the new owner is generally responsible for what the company does.

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