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How Not to Purchase a Business

If you want to purchase a business, you can do it in two different ways: you can purchase all of the assets of the business or you can purchase the entity itself. An asset purchase is simple to explain: you simply purchase all of the tangible and intangible property of the business such as real estate, equipment, vehicles, customer lists and even the name itself. You do not take on cash, bank accounts, accounts receivable or payable. You take on only such liabilities that you choose to take- perhaps a lease, for example.

r you can purchase the entity itself. An asset purchase is simple to explain: you simply purchase all of the tangible and intangible property of the business such as real estate, equipment, vehicles, customer lists and even the name itself. You do not take on cash, bank accounts, accounts receivable or payable. You take on only such liabilities that you choose to take- perhaps a lease, for example.

The second way is to purchase the entity itself. For example, you can purchase all of the stock of a corporation or all of the membership interests of an LLC. In that case, you simply step into the shoes of the prior owner and take on all assets and liabilities. In almost all cases, we do not recommend that you purchase the entity- it is just too complex and too dangerous.

We also strongly recommend that you not try this as a DIY project! There are good forms available on the Internet but it is really hard to determine which are good and which are not. Furthermore, even the good ones may not be appropriate for your specific goals. It may be expensive to get good legal and accounting advice before signing a Purchase and Sales Agreement but it frequently is a lot more expensive if you don’t! We would rather keep you out of trouble than have to get you out of trouble.

Just call us and we will make certain that your purchase is handled expeditiously and correctly. 603-249-5925

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Avatar Dwight Sowerby