Going into business doesn’t always mean starting everything from scratch with nothing, there are a number of businesses that are in the market and may be a great investment for you.The first step when it comes to buying a business is seeing a business broker who will then introduce you to a few businesses in your area that are available for purchase.The one thing you need to take into consideration is the most important thing about buying a business, you need to buy into a business you feel you’ll be able to manage accordingly. The three most important things include the location of the business you are buying, track record (including trends of sales) and the management that is currently in charge.

The list below gives you a list of 10 Things You Should Consider Before Buying A Business:

1. Make sure you’re buying the assets, not the business.

If the seller of the business is a corporation, under no circumstances should you buy stock in his business. You should consider only buying the assets of the business and act as a separate buyer. This is a better deal when it comes to paying tax on the assets your tax basis will be the amount you paid for the assets instead of the amount the current owner paid on the good years ago. An added bonus is that if the owner of the business owes money to someone or is being sued you won’t be liable to pay back those money’s because you own the assets of the business and not the business.

2. Ask about sales taxes and payroll taxes.

Even if you only own the assets of the business if the owner owes taxes they can still come after you for tax evasions. Find out from the current seller if his employees were using the payroll service and if they were on employment payment tax. Then ask the tax authority to issue a “clearance letter” saying the seller is current in his sales and use taxes on the closing date. This may take a while, but it will save you a lot of money and time in the long run.

3. Determine who will deal with the accounts receivable.

You may sometimes find that a large number of clients may owe the business money even close to the closing date of business. Who will be in charge of collecting these overdue debts for you? You have two available ways to deal with this:You could purchase the receivable accounts by closing date for a discount to show that some of these clients just won’t pay up, or you may request that the seller collect them at his own leisure . It is always advisable for you to buy the accounts receivable of the business at closing, that way, if the delinquent customers want additional work done after the closing, you’re in a better position to bargain.

4. Find out if you can take over the lease.

You should find out if the seller is leasing the premises on which he is running his business from if so, you should then find out from the landlord if the lease can be taken over by you as the new owner with no additions to the current rent amount.If the lease may be ending soon you might want to consider using some money now to extend the lease for long term business. Also make sure you find out about additional costs such a security deposit which are normally two months rent.

5. Are there prepaid expenses?

Prepaid expenses such as the seller’s security deposit usually are not included in the agreed-upon purchase price but are included when you finally seal the deal.Make sure you ask the seller for a list of “closing adjustments” with the right amounts not just estimates  so you are able to budget for the additional costs accordingly and there will be no surprises at the closing.

6. Be aware that there are several value drivers of the business:

• Location
• Furniture, fixtures and equipment
• Inventory
• Trained employees
• Established customer base
• Existing cash flow (sufficient to pay expenses and make a living)
• The industry itself (future market for product/service)
• Competition
• Financial records and representations by seller
• Your plans for improvement

7. Negotiate a “letter of intent.”

Also known as a term sheet. This is basically a few pages between the buyer and the seller of the business that lays out the terms and conditions of purchase. For example, it should include the purchase price, how and when the purchase price should be paid to the seller, the assets of the business that will be sold to the buyer it should also include the assets that the seller will be keeping for his own use, the terms of the seller’s noncompeting agreement etc.The letter of intent is not binding of any of the parties it just mentions the intended sells between the two, it is worth the time and effort to highlight many of the business issues involved before the lawyers begin drafting the legal contracts that will document the final sale. A well-drafted letter of intent helps the lawyers get the sale documents right on the first draft without having any back and forth or complications which then helps the sale go a little quicker.

8. Get an indemnity from the seller.

In some cases the buyer thinks that they have taken care of everything when it comes to the business but you may tend to miss something and later find out that the seller failed to do something or pay something and in the end this becomes your responsibility since the baby is now yours the lawsuits fall into your lap.Get an indemnity from the seller, promising to defend the lawsuit and pay all judgments and fees if that should happen any time after you have purchased the business. Likewise, you should be prepared to give the seller an indemnity if he gets sued because of something you do or fail to do after the closing the deal.

9. Make sure the seller sticks around for a while.

In many retail and service businesses, you always find that the customers have a personal and business relationship with the owner. Always ask the seller to be around for a few weeks after you have taken over the business for them to be able to introduce to the customers of the business, help you figure out the books and ensure a smooth transition of the business at least until you’re comfortable you know what you’re doing and can run the business smoothly and efficiently without the customers taking too much note to new management.

10. Get to know the employees.

Before you buy a business make sure that key employees are willing to stay with the business when you take over, they are the ones that know the running’s of the business and they are the ones that keep the customers coming back because we all know the customers love great service we don’t know how new service will be accepted. Although many sellers are a little reluctant to let their employees know that the business is up for sale because they fear they’ll quit and leave the business in disorder. In that case, put a provision in the sales contract that reads: “Seller and Buyer will announce the proposed sale to all employees of the business within forty-eight hours before the Closing, and Buyer will be given a reasonable opportunity to meet with each employee individually before the closing date.”