Buying or selling a business without proper planning or preparation can lead to drastic mistakes--costing you thousands of dollars in the process. To help you avoid mistakes, our New Jersey business law attorneys explain what you should know before going through a business transaction.
Research the Business’s History & Finance Before Buying
If you are considering a particular business, you should thoroughly research the company’s history and financial records. You should review their cash flow statements, balance sheets, accounts payable and receivable, along with employee files and benefits. We also recommend reviewing any major contracts, leases, or past lawsuits which may have resulted in judgments or liens against the entity or owner. Conducting a thorough investigation will help you foresee any potential problems.
Determine Market Value
Before buying or selling a business it is crucial that you determine its value. Below are some methods to determine market value:
- Comparable: Oftentimes, people like to compare what other, similar companies have been bought or sold for. However, this approach only works if the sale occurred recently. Small businesses in particular are unique, so this isn’t the only factor that should be considered.
- Asset-Based Evaluation: Aside from researching other similar business transactions, you should also total up the value of all the assets, including trademarks and copyrights. This can help you set an ideal price for your deal.
Partner with an Expert Before Making a Deal
Once you advance to the deal stage, it is important to have an experienced and knowledgeable attorney on your side. An attorney can advise how best to structure your deal--whether as a stock sale, a transfer of your controlling interests, or a sale of business assets. An attorney can also work with you about meeting your disclosure obligations to avoid future tax and corporate liability of any risks that could arise in the future.
Contact M. Ross & Associates, LLC at (201) 897-4942 for dependable advice and comprehensive client services for all your business acquisition or sale transaction needs!