When you purchase the shares of the business, as explained in the previous blog, you have an interim closing often subject to a financial statement. If the accountant of the previous owner prepares the financial statements, the new owner may think they may be biased in favour of the financial statements. If the purchaser’s accountant prepares them, the old owner thinks that they may be biased. I usually recommend that the buyer and seller negotiate the formulas or valuation of the contentious items such as inventory. If you both can agree on a formula or number, there will be nothing contentious in the rest of the financial statements therefore you can use either party’s accountant and both parties hopefully will believe that the financial statements are accurate and not biased.
This article are provided for information purposes only, and are not intended as legal advice.
- If you buy the shares of a business, when is the closing of the purchase and sales of the business?
- When do you sell a business, before or after you issue financial statements?
- When buying a business – what questions should you ask? – Part I
- What should you consider when buying a business?
- Did you find the right business for sale? Part II
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