Q&A: What type of contracts are needed and additional paperwork in order for me to acquire a business?

Question by senzualsindhique: What type of contracts are needed and additional paperwork in order for me to acquire a business?

i will be buying a business from someone and taking over the lease as well as the inventory and equipment. What paperwork do I need to structure?

Best answer:

Answer by ed
I hope that the first thing that you have already done is get a real look at finances of the business. A standard P&L is not a true picture of Cash Flow.
Fixed Expenses. (These are absolute recurring expenses)
Descretionary expenses, (Owner draw included here).
Lease and length.

Take an inventory count. Do not take estimates or another’s count.
You’ll want to reduce the value of any old or undesirable merchandise. There may be some that should be zero. You’ll have to negotiate in some cases.
Fashion merchandise is critical in this respect.

If this is a retail store, you should have some agreement on “customer complaints”, or “adjustments” for which you may be willing to accept for a set length of time.
(1 year or less)

Be certain that you will not be responsible for ANY TAXES, liens, or debts that are his obligations.
If you assume any, at least do it with full knowledge.
Accounts receivable has to be considered.

If a service business, you need protection on retaining clents.

WRITE THIS DOWN!
You must have an agreement, in writing, that the seller WILL NOT open a similar or competitive business.
NOT in the same city.
Not within a set distance…maybe 100 miles, or close enough to recapture “your” customers or clients.

You should have an attorney draw up a legal and binding contract.
Protect yourself. It is money well spent.

Good luck.

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