There are many things to consider when making such an investment, and in this blog post we will explore three of the most commonly overlooked areas: legal documents, retirement plans, and 1099’s and W-2’s. Each of these areas can have a significant impact on the success of your business purchase.
- Examine All Legal Documents
One such issue is the potential for the corporate veil to be pierced. This occurs when the owner of a company uses the company as an extension of their own personal assets, and can happen in a number of different ways. Therefore, it’s crucial that you examine all legal documents relating to the business – from trademarks and copyrights to other areas of intellectual property. By doing so, you can avoid any nasty surprises down the road.
- Retirement Plans
There are many things that can go wrong when buying a business. One of those is the retirement plan not being up to date with the Department of Labor. This mistake can lead to disaster because it isn’t always something you think about when looking at a company’s financials or going through due diligence on their books. And if they have been neglecting this area for years, then chances are they won’t be able to afford the cost associated with upgrading their plans and getting them back into compliance with the Department of Labor regulations, which could result in bankruptcy or closure for your newly purchased company.
- W-2’s and 1099’s
If 1099 forms were given out instead of W-2’s, many business owners would be in for a surprise. That’s because the IRS has different rules for what constitutes a valid employee when it comes to 1099’s versus W-2’s. Do your homework and understand the implications of using 1099 employees instead of W-2 employees. Otherwise, you could end up with some nasty surprises from the IRS.
When buying a business, it is important to remember that you are entering into a partnership with the seller. You want to be sure to do your due diligence and protect yourself from any unwanted surprises. One way to do this is by working with a business broker.
A business broker has the expertise and experience to help you navigate through the process of buying a business. They know what to look for and can help you avoid any common pitfalls. So if you’re looking to buy a business, be sure to work with a qualified broker!