What to Know When Buying a For Sale By Owner Business

Purchasing a business is a big decision that an entrepreneur can make in their professional life. Purchasing the business directly from the current business owner with no lawyers or business brokers involved can put even more pressure on the buyer. The buyer must serve as his own business broker and research the business he is considering buying intensely before making the purchase. These types of business decisions should not be made hastily, and only after analyzing all the facts available to you.

Significance

Purchasing a business that really is for sale by the owner can be a very risky business proposition. If the owner is not using a third party source in the sale such as an attorney or a business broker, this limits the resources the buyer has to verify the credibility of the seller's statements about the business. Selling a business without representation could be done to limit expenses in the sale. Unfortunately it may also be done by the seller to hide important information about the business.

Features

Finding out about a business for sale by the owner is very important before making the purchase. Ask to be able to view financial statements of the business, and make sure you check for any outstanding debts the business owes. Along with this, inquire from the owner if you are free to contact clients of the business you are considering purchasing. If the owner refuses this option, inquire around town with any contacts you have in the area in which that business operates to find out what the reputation of the business and it's owner is. When dealing with the owner directly of a business that is for sale, determining her credibility is esssential.

Considerations

If you do discover the company has any outstanding debts, make sure this is reflected in the sale price of the business. Also find out if the business is currently leasing space, or if the owner of the business owns the building that the business is located in. If the owner of the business owns the building, determine if the building will be included in the sale. If it is not, determine if a long term lease can be negotiated. If the owner of the businesess no longer wishes for the business to occupy the building he owns after the sale, negotiate for a reduction in price based on the need to find a new location for the business.

Benefits

Owning a business can offer you specific tax breaks as a business owner. These tax benefits vary greatly from state to state. For this reason, it is a good idea to hire both an attorney and an accountant when purchasing a business. By owning a business you will be able to make your own decisions with no higher authority to answer to. This can be a great sense of freedom and improvement on your own morale if you have been struggling while working for someone else.

Warning

Owning a business can be a great experience, but also a great liability. Keep in mind that if you operate your business as a sole proprietorship, creditors and anyone filing a lawsuit against the company can also have access to your own personal funds in the settlement. This is a strong reason why you should look into registering the company as a Limited Liability Company, also know as an LLC, after purchasing it.