Top 3 Common Mistakes When Buying a Business
Georgia is potentially a great state to consider buying a business in. The growing business environment is a potentially excellent choice whether you are a new business owner trying to become your own boss or a current owner looking to expand your company. Here are a few common mistakes to avoid when buying a business:
Failing to Conduct Due Diligence
An important part of owning a business is doing your own homework. This includes doing your own research before buying a business. Be sure to check what property the business owes, whether it is on a lease or owns the property, what is owed to the business, and what the business owes. If you purchase a business with a large amount of bills and no income, you could be setting yourself up for financial disaster. It may be tempting to trust the old owner to be forthright, especially if the owner is a friend or relative. However, due diligence will ultimately save you a lot of trouble down the road.
It may be tempting to conduct this due diligence yourself to save money. However, accountants, attorneys, and other consultants will often know what to look for, especially if you are unfamiliar with accounting or legal issues that are common in businesses.
Failing to Create a Business Structure
One of the most novice and worst mistakes in owning a business is failing to use a business entity structure to protect yourself. If you own the business in your own name, you would be personally liable for any loss that the business incurs. This potentially includes debts to contractors or lawsuits from plaintiffs. Buying a business without a corporate entity to minimize your personal risk could lead to creditors going after your savings, your home, or other valuable property. Consult with an attorney to find out how to set up a corporation to protect your business and your assets.
Failing to Secure Enough Financing
Purchasing a business is a big investment. Many people will take out a loan to purchase a business in the same manner they may take out a loan to purchase a house. However, securing payment quickly is often important especially if there are multiple potential buyers.
The financing should also be large enough to safeguard any shortfalls. A change in ownership may trigger the end of old contracts, including vendor contracts, employee contracts, or old leases. If that occurs, you may need additional time and capital to either renew those old contracts or find new business relationships to fill the void.
Should I Hire a Georgia Business Lawyer?
Matters involving business laws can be very complex. Whether you are starting, merging, or purchasing a business, it is a good idea to hire a Georgia business lawyer for help. There are generally many different types of laws and regulations that apply when running a business. Hiring a local Georgia business lawyer will help to ensure that you and your business are compliant with all state laws, that any documents related to your matter are enforceable, and that you have followed the proper state procedures for all relevant matters.