Neufeld Legal P.C.
Purchase Business - Strategy and Law of Buying a Business
416-887-9702    905-616-8864    403-400-4092 

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QUESTIONS WHEN PURCHASING A BUSINESS

First and foremost, why is the seller selling? The answer will either raise red flags or be consistent with, and met with, no resistance when asking the information in the questions below.

Have you asked to review the certified financial statements of income, cash flow and balance sheets for the last three years? If you borrow from a bank to purchase the venture, the bank will want to see them.

Have you asked to see the company’s (not the owner’s personal) tax returns for the last three years? The bank will.

Have you asked for a copy of all documents of all outstanding indebtedness like accounts payable, property and equipment leases? The bank will.

Has the seller offered to stay around for awhile after the sale to help with transition, and have you discussed some compensation for his services during that transition period?

Have you been allowed to talk with the employees, or is this sale of a confidential nature at this time? If so, why are the employees not being told of the impending sale?

Has there been any significant turnover of employees? If so, why is that?

Have you learned anything about the quality of customer relations at the company? Is there a close relationship between the business and its customers?

Have you learned anything about the relationship between the company and its vendors? Do vendors display preferred, regular or irregular relations with the company?

Are there any members to a management team for this business? If so, are they aware of the impending sale, and how do they feel about it?

What are the actual conditions of the working environment? Are there any hazardous situations or is this a well-kept workplace?

What are the actual conditions of existing fixed assets like office equipment, machinery, vehicles and the like?

Do employee, managers and supervisors demonstrate good maintenance and cleanliness of company property?

Of critical importance, all things considered, are you paying a fair price for the purchase of this particular business? These are but a few of the questions that you should begin to ask when investigating the prospects of that business acquistion.

For experienced legal advice when purchasing a business, contact business lawyer Christopher Neufeld at Chris@PurchaseBusiness.ca or by telephone at 416-887-9702 [Toronto]; 403-400-4092 [Calgary]; or 905-616-8864 [South West Ontario].

 

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The information presented herein is intended for information purposes only and solely as a general guide. The information is not intended as legal advice. It is a summary of selected/potential issues and does not represent a definitive or complete statement of strategies and law relevant to scenarios that are highly particularized, fluid and rarely, if ever, certain and fully disclosed. The information may not address the special needs, interests and circumstances of a particular scenario, with a single factor potentially necessitating an entirely different approach. Scenarios differ and you are strongly urged to seek specific professional business and legal advice.

Neufeld Legal P.C. is strategically positioned to effectively serve key Canadian business markets, with offices located in Toronto, Calgary, Mississauga and Burlington. As such, we are capable of effectively serving the western Greater Toronto Area (GTA), including downtown Toronto, Mississauga, Burlington, Oakville, Hamilton, Brampton, Milton, Guelph, Kitchener Waterloo, Cambridge, London, St. Catharines and Niagara Falls, together with the city of Calgary and southern Alberta. Copyright 2010.

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