Last Updated on Dec 20, 2019 by James W
Buying an existing business is completely different from establishing a startup in the same industry. You don’t need to take care of any previous financial records if you’re starting up a startup, as everything is to be set up from scratch. However, if you’re going to buy a business that has already been on the market for a while, it becomes important to take care of a number of factors. For one, you need to know how to take care of the financial records of a business before you acquire it. For this purpose, it is important to have a legal advisory team along with an accountant who can help you go through this hectic process and decide the best business to go for.
- Sales report should be checked:
The very first thing you need to do in order to ensure all the essential financial records are legitimate is to go through the sales report of the seller before you purchase the business. All the previous data must be present in the system of the seller and he is obligated to let you go through that information. Your accountant should be experienced enough to make sure that all the sales reports are precisely the way they should be. This step is crucial when it comes to ensuring all the financial records are maintained by the current business owner.
- Look at the tax return:
After you look at the sales report, the tax return documents should also be thoroughly reviewed in order to have a clear picture of the inside of the business you’re about to buy. When you buy an existing business, you’d have to pay all the taxes that are being paid by that business. If you happen to choose Michigan as the location for your business, taxes for any business for sale in Michigan would be different from any other part of the world. This is something that you can’t opt to choose if you are going to buy an existing business that’s already paying these taxes, as many business taxes are determined on the state and local level.
- Financial statements should be thoroughly checked:
Every financial statement should be properly analyzed by a team of professionals in order to determine whether the business you’re buying is genuine or not. Make sure that none of these financial statements are manipulated in any way; otherwise you’ll end up feeling cheated by that seller. For this purpose, your team should be qualified enough to figure out whether the condition of the financial records of the business is up to snuff or not.
- Analyze the fluctuations in the business’ financial success:
Before you buy any existing business and relaunch it in the market as your own, it’s quite important to look back at how the business has been performing for the last several years. Ups and downs should be critically analyzed in order to draw conclusions that can help you while finalizing the deal. You can also discuss with your seller regarding the strategies that he came up with when the business was hitting rock bottom. This will give you insight into the industry you’re about to step into.