With enough financial resources at your disposal, another way to hit the ground running in setting up a business is to buy a pre-owned business. If you decide to go this route, you have to get the right information prior regarding the particular business you plan to buy. Aside from your negotiating skills and strategies, you have to find out how much the purchase price is, who are the partners involved in the business. Knowing about due diligence is definitely an added advantage. Having all the right information can lead to a more informed and relatively straightforward business acquisition.

Guidelines for Buying a Business
Acquiring an established business more often than not is more costly but less risky than starting from scratch. An established business already is already up and running with an established client base.

You do not have to pay any federal tax when you acquire an existing business however, buyers are legally responsible for the business outstanding tax liabilities that you may acquire along with the business and tax audits and bills for years prior to the date you took over the business.

Regardless of the type of business you are interested in acquiring, tax issues are surprisingly similar. It is up to you, the buyer, to discover what the potential problem areas are because some tax problems may not arise until you have already bought the business; you have to take the necessary steps to protect yourself against this eventuality.

1-2-3 of Buying a Business
1.You, as the buyer, together with the seller must jointly assign a value to all business assets to be transferred and report it to the IRS. You can write off goodwill and other intangible business assets you purchase over 15 years.
2.Be vigilant of outstanding tax liabilities; do not forget to check for tax liens. Although there are no federal taxes on business purchases, states and localities may impose transfer taxes.
3.Require the seller to sign an agreement of indemnification for any tax debts attaching assets you are buying together with the business entity.

Seek Professional Legal Advice and Assistance
Some of the potential problems you have to be aware of when you acquire an existing business entity are undisclosed debts, padded earnings, and poor employee relations and overestimated value of inventory. Liabilities can exist in the form of land contaminated with toxic chemicals, uncollectible accounts receivables, defective or expired inventory and even hidden lawsuits.

It is best to have lawyer who is well versed in the field. Your lawyer can either represent you or act as your coach when you sit down at the negotiating table. It is even more prudent to have an accountant as a member of your acquisition team to give necessary advice on the taxation aspects of the business. It is always best to outgun the opposition than yourself since you are the one who will finally own the business if acquisition goes through.

Taxes
Although there are no federal taxes due on business acquisitions, the state, county, or city where the business and its assets are located may impose a transfer tax, either on the buyer or on the seller. If the seller will shoulder the transfer taxes your agreement should stipulate that it be paid out of escrow at closing. Otherwise, if the seller does not settle the transfer tax obligation, the taxing agency will usually come after you or the business assets.

Some states, city or locality may impose taxes like annual personal property taxes, business fixtures and equipment or on the business inventory. Make sure that these taxes are not up to date or are paid at the time of closing. You certainly do not want to inherit them from the previous owner.

Do You Need a Broker?
You do not necessarily need a broker if you want to buy an existing business. More so if you are acquainted with the owner or already have a good idea of the type of business you want to buy. However, if you are starting from scratch without any knowledge or prior experience in your prospective business of interest, the services of a business broker may be necessary to assist you nail down essentials.

Brokers can provide you with the necessary information, statistics to help you make informed decisions on the type of business you need to buy; how much cash outlay you will need, and the different types of businesses available for acquisition. They can help right from the appraisal to the negotiating process to the closing of the deal. Brokers earn their commissions from sellers; this means they always have at the ready a list of businesses available for sale. You may be surprised at the number of listings good business brokers have, by industry or by geographical location.

If you want to use a broker, make sure to ask for references or a list of former clients. You can then make an appointment with them and inquire about their experiences with the broker or the business.

Why Due Diligence is Necessary When Buying a Business
Business acquisition is a long and tedious process but very rewarding even if it takes months to complete. In buying a business, you are investing time and hard-earned money therefore it is critical that you gather enough information regarding the business you plan to buy. This arduous process is referred to as conducting due diligence.

Conducting due diligence helps the buyer avoid problems and learn all he needs to know about the business before signing the agreement and committing himself to the deal; however, you can have your lawyer draw up a definitive agreements which stipulate that the you can back out of the transaction if the due diligence results are not satisfactory.

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