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


What do you get when you buy the assets of a business for sale?

September 27th, 2008

If you purchase the assets of a company, you get what is in the purchase and sale agreement.  if you thought that something was included but it is not in a closing schedule of the purchase and sales agreement, chances are that you did not purchase that asset.  If you by the assets of the company, you rarely purchase the cash.  That stays with the old owner.  Sometimes the old owner keeps the receivables.  If the old owner collects the receivables, problems sometime arise.  If a customer is paying an invoice, do they pay the oldest invoice first i.e. to the old owner or the most recent to the new owner of the business?  What happens if the old owner is rude and upsets the customer.  Will you lose the customer?  I recommend that the new owner collect the old receivables on behalf of the old owner.  That way there is no potential problem of the old owner bullying the customer to collect his/her receivables.  Sometimes the back of the cheque is endorsed and given to the old owner, sometimes, it is cashed by the new owner and the receivables are reconciled weekly and the old owner gets paid when the old receivables are paid.  If you pay too quick and the customer cheque bounces and you paid the old owner, you could be out of pocket. 

 

Are the supplies included in the purchase price?  Do you have a detailed schedule of assets which is included in the purchase price?  Are there any assets included which belong to the old owner – the owners car which is owned or leased by the company may be an asset.  What happens if there is a lease and the new owner of the business does not want the leased equipment?  This has to be considered in the purchase and sales agreement. 

 


Filed under: valuation of a business — Gary Landa @ 10:23 am


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