Deciding to purchase your first business is a significant step that can be exciting and rewarding. With that being said, it’s also a challenge.
You need to take steps to ensure that your investment is as safe as possible and legally watertight. In other words, it’s important to carry out due diligence. Outlined below are a few important things to keep in mind as a first-time business buyer:
Consider the organization and structure
While you plan to implement changes to the company, it’s important that it has a solid legal foundation. One of the first steps in due diligence is to gather details about executives, shareholders and company bylaws.
It’s also important to ensure that everything is above board legally in terms of trading. The company should be fully licensed to trade in your geographic region.
Make sure that the financials check out
You’ll also want to ensure that the finances of the company are sound. This involves taking a close look at audits, financial statements, debt obligations, inventories and the company’s general ledger.
Again, while you may plan to make changes that make the business more profitable, you need to know where you are starting financially.
Look at the property holdings
It’s important to have a firm grasp of what property the business owns. This includes physical buildings, digital assets and intellectual property. Do you have access to the relevant titles and deeds for company buildings? Is the company’s branding, such as the logo and trade secrets protected?
These are just some of the key areas of due diligence to conduct before purchasing your first business, there are several others. It’s crucial to have legal guidance behind you to assist with this process.
We help first-time business buyers with their transactions. Contact us for a consultation to learn more.