This article are provided for information purposes only, and are not intended as legal advice.

Do you need professionals when you buy a business?

December 16th, 2008

I have seen so many owners try to save money by not using a lawyer and accountant.  A client came to me and mentioned that they had a great deal, paid no rent, was given full access to space and office in a third party premise.  His company owned $1 million of equipment and placed that equipment in the location provided by the supplier who gave the free space.  Could he get locked out and lose his equipment?  He had no lease, no agreement with his supplier and sometimes would be over his credit limit with his supplier.  The client felt that he got a great deal but did not realize that he could lose everything.

It is nice to be able to save money on professionals.  If there is no problems then you may be lucky and get away with it but when there is a problem, it may be too late to undo what agreements you have done.

A client of my CA practice came to me and said that they purchased a business.  They did not realize that in Canada when you buy the shares of a business and change owners there is a deemed year end for tax purposes.  He had no idea, was not sure if he purchased the shares or assets of the company and did not know what liabilities he undertook by buying the business.  He was lucky but he could have purchased a bankrupt company, he did not do any due diligence and was not sure of the process or the issues that he should have asked but he was sure that he got a good deal so he bought the business.  Was this a wise decision?  This person was lucky but the next person who does this may not be so lucky and could risk losing everything.  Since the markets are changing very dramatically and the business which took place in the past may not continue in the future, it is more important that you hire a good lawyer and accountant to assist you in buying a business.  It may cost more now but could save you significantly more in the future.

Filed under: Buy a business — Gary Landa @ 9:45 am

1 Comment »

  1. It is a great idea to use a professional to assist when either buying or selling a business. We do it for a living and strongly advise our clients to talk to folks on both the buy and sell side that we have worked with, to hear it for themselves.

    Comment by Buying a business — December 18, 2008 @ 11:44 pm

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