Purchasing a Business
There are several ways to purchase an existing business and the methods that you select depends a great deal on the business entity you are buying. For example, if you are interested in purchasing a controlling interest in a corporation you’ll want to consider exchanging cash for stock in the company. Buying a 51% stake in the company will allow you control of the company. If the selling partner does not want to be in the business any longer you can buy him out and own 100% of the company. Other business entities like partnerships may allow you to buy a percentage of the company in exchange for cash or other assets that you place in the business. In certain situations, a company could make you a partner based on your performance or the degree of expertise that you bring to the company.
If you are buying into a partnership be careful to fully examine the company’s financial statements as you may be responsible for existing debts and liabilities of the partnership. In any event, you’ll need the professionalism, experience and business knowledge of a Michigan business purchase attorney that the attorneys at The Law Offices of Rahti and Associates provide to ensure that you’re advised as to what you may be undertaking as well as preparing, completing, and filing the necessary paperwork.
There are several financial documents that need to be examined in detail prior to purchasing a business. The first and most important is the company’s balance sheet. A balance sheet is written annually or in some cases quarterly and lists all of the assets and liabilities of the company. It is important to know not only the amount of the existing debt you will be taking on but also its terms and repayment plans. Any liabilities that the company has such as accounts payable will also be listed on the balance sheet.
The other important document that needs analysis is the income statement. An income statement will tell you how much the company had in total revenues for the period in question as well as how much it cost the company to produce that income. You’ll see how much is being paid out for general categories such as salaries and dividends to stockholders and you’ll be alerted to dig deeper should any number seem out of line.
There are many more items not listed here that need to be analysed before you take the leap and buy or buy into a company. The Rathi Legal Group can help you every step of the way from the initial meeting through the closing and beyond to make sure that you get all of the facts of the transaction. Call us now.