Whether you are making your initial foray into the business world or you are an investor thinking about adding to your portfolio, buying an established Florida business is always worth considering. To be successful, however, it is critical to be fully prepared before you make the deal. Here are a few things to think about.
Some of the biggest advantages of buying an existing business in Florida, rather than starting your own, is that you don’t have to don’t have to incur the risk and expense of building it from the ground up. You’ll also be able to tap into the existing customer base and you might not even need to worry about hiring new staff.
For Florida investors, one of the biggest pros is the ability to assess the viability of the business by reviewing past tax records and financial documents.
On the other hand, one of the biggest disadvantages for all buyers is the complexity of the legal and regulatory requirements associated with the acquisition. Because there are different rules and regulations for the acquisition of different businesses, it is crucial to consult with qualified legal professionals.
A good business lawyer can help you:
- Identify the best legal structure for the business
- Establish an Employer ID number for tax purposes
- Open necessary bank accounts
- Make decisions about payroll
- Obtain a sales tax license (if necessary)
- Obtain any additional licenses
- Address insurance and liability issues
Having said that, there are certain decisions you’ll have to make on your own. Ask yourself the following questions to assess your readiness and ability to buy an existing business:
- What are my reasons for buying?
- Do I have any special skills or educational background that is compatible with a specific type of business?
- Is my past work and/or business ownership experience compatible or incompatible with a specific type of business?
- What do I enjoy doing in my spare time? What am I good at?
- How much of a down payment can I afford to make?
- Should I have a partner and if so what should I ask him or her to contribute?
- Am I willing to use personal assets as collateral for a loan?
Once you have done an honest assessment of your personal circumstances and reasons for wanting to buy a business, you should also ask yourself the following questions:
- Am I most interested in a service, retail, wholesale/distribution, manufacturing, or restaurant/fast food business?
- Is there one type of business that I would like to buy more than any other?
- What type of business holds no appeal for me whatsoever?
- How much do I need to make to meet all of my personal and business obligations?
- What is my ideal business location?
- What are my preferences with regards to commuting?
After you’ve completed both assessments, you should find an experienced business broker (we can help you with that). He or she will find available businesses that meet your needs and facilitate your meeting with the owner, tours of the business facilities and so forth. If everything meets with your approval, you can finally take the next big step, namely making an offer and conducting due diligence.
Performing due diligence can usually take a few weeks or up to a few months, depending on the complexity and size of the business. As part of this process, we will review specific information to ensure the seller hasn’t withheld any critical information or otherwise attempted to mislead you. Specifically, Eskander Loshak will review:
- Recent tax returns
- Recent profit and loss statements
- Recent bank statements
- Recent sales tax returns
- Recent general ledger entries
- A copy of any lease agreements
- Recent payroll tax records
- Employment records
- Copy/ies of any relevant insurance policies
- A comprehensive list of relevant equipment
- Recent tangible tax returns/records
If you are buying a “cash business,” we will also review the following to verify earnings:
- Recent register tapes
- Recent COGS invoices
- Recent cash expense records
Clearly, buying an existing Florida business is a daunting process that requires a great deal of thought and effort. As we have noted, preparation and collaboration with knowledgeable, experienced legal professionals is essential. To learn more about how we can help you buy an established business, contact us today.