Mistakes to Avoid when Buying a Business in Florida
When you purchase a business, especially if it is your first time as a business owner, it’s imperative to seek legal guidance. You need to ensure you understand the terms of the purchase as well as your legal obligations. No matter whether you are buying a small business or a large enterprise, we recommend meeting with a West Palm Beach business transaction attorney.
At the Law Offices of Larry E. Bray, P.A., we have years of experience assisting potential Florida business owners. We can help streamline the process and avoid the mistakes that some people make when buying a new business. Some of these mistakes can include:
Purchasing the Wrong Business (For You)
It’s important to purchase the right business. And, this doesn’t refer to purchasing the most successful one. It’s about purchasing the right business for you. It’s important to buy one that aligns with your interests, knowledge, skills, and personality. The business may not end up being successful if you do not have experience or a passion for the business you plan to purchase.
Failure to Do Due Diligence
Don’t automatically trust that what you see on the surface is accurate. A business might look to be profitable, but this doesn’t mean that there aren’t problems. You need to do your due diligence and understand the entire financial picture. What does the business own? What is leased, or what do they still owe on? You could find out you bought a whole pile of debt once everything is said and done.
Putting Everything in Your Own Name
You should not be putting everything for the business in your own name. This includes loan agreements, lease and rental contracts, etc. You should set up an LLC or a corporation to handle everything, otherwise your personal assets could be at risk with the business.
Making Too Many Changes Too Fast
People often buy a business and then think they need to shake things up and change things around. If you try to institute a bunch of changes at once, you may stress out your employees. Or worse, they may become resentful and start openly resist these changes. You shouldn’t ignore input and background information that employees can provide when you take over a business.
Ignoring the Brand Image
Along with making too many changes at first, some new business owners ignore the existing brand image. If the business appears successful, trying to change the company brand or image can end up backfiring. If it’s a long-standing business, customers identify the logo or overall image with that brand. Changing that could alienate a good portion of the existing customer base.
Financially Overextending Yourself
Buying a business is expensive. Don’t overextend yourself or go into major debt just to purchase it. It makes more financial sense to hold off and wait until you are in a better position or have additional funds in order to secure the business you want.
There are many legal issues that must be addressed before closing on the purchase of someone else’s business. These include, without limitation:
- Judgement, suit and lien searches on both the county and state level to see if there are any liens on the assets;
- Asset purchase vs. stock purchase;
- Restrictive covenants and non-compete agreements;
- Need asset purchase or stock purchase agreements;
- Warranties and representations of seller;
- Review lease or real estate purchase agreement;
- How will the purchase price be paid;
- List of assets;
- Intellectual property transfer;
- Need all closing documents.
Contact a Florida Business Attorney
If you need assistance with purchasing or selling a Florida business, contact the Law Offices of Larry E. Bray, P.A., today, at 561-571-8970 to schedule an initial consultation.