Tips for first-time business owners before they make that buy

It can be exciting when you are about to buy a business for the first time. As with many things, though, you are determined to not let excitement overrule good judgment.

To that end, here are a few tips to help ensure you are making the best purchase for your situation.

Discuss who takes care of late payments from customers

It is a rare business that gets sold with its customers or clients having submitted every payment they owe. So, you and the seller need to discuss who has the option of collecting these payments. You should probably offer to do so because it gives you a chance to connect with current customers of the business, and you can get a discount in the sale for these accounts receivable since it is unlikely you will be able to collect all of the late payments in full.

Hammer out an indemnity agreement

What happens if you take over the business, and a customer sues you for something that happened on the previous owner's watch? Sure, you might have pored over the business records and journals, but that incident slipped through the cracks. You do not have to be on the hook for legal fees and more if you have an indemnity agreement in place. It obligates the seller to defend any lawsuit and to pay for any financial consequences stemming from it. Know that the seller will probably want such an agreement from you too so he or she is not responsible for something you did after the business is sold. This is normal business practice.

Consider buying the assets instead of the business if it is a corporation or LLC

Buying "assets" instead of a business might sound boring, but it makes sense in some situations. For example, you avoid liabilities if the business owes a lot of money, and you may get to start with a better tax treatment.

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