Considering stepping into the world of entrepreneurship by purchasing an already profitable business? It’s an exciting journey that can put you on a faster track to success than starting one from scratch. However, the process can also be intricate, stressful and complex, demanding not only the preparation of several documents but also a deep understanding of the business’s legal and financial landscape. The process can seem overwhelming; however, help is available and the majority of successful purchasers have a team of experienced advisors behind them, providing essential guidance through every stage of the transaction.

In light of this, we at Coepio Legal have curated a comprehensive checklist to steer you through the critical considerations before you take the plunge. However, because each transaction is unique, you should consult with your tax and legal advisors for more information regarding the crucial elements you need to consider before signing on the dotted line.

1. Company Records

The following documents are standard. If any are missing, inquire about their absence:

• Articles of Incorporation
• Secretary of State Document – Certificate of Good Standing
• Company Organization Charts, Bylaws, Minutes of Meetings, Listing of Shareholders, Shareholder Agreements, etc.
• A list of all states where the company operates, has employees, or owns property.

2. Company Finances

Thoroughly review the company’s financial health, including:

• Company financial statements, along with any auditor’s notes
• Accounts receivable and payable, a listing of all assets and inventory, a listing of all indebtedness and contingent liabilities
• The company’s depreciation/amortization methods and accounting practices
• The company’s internal control processes concerning finances
• Any contracts the company has with any other entity
• All federal, state, local, and foreign tax returns.

3. Company Assets

Ensure you understand the company’s assets, both tangible and intangible, and request:

• List of all physical assets
• Copies of all company real estate deeds and leases
• All intellectual property assets (trademarks, trade names, copyrights, patents, trade secrets), and any measures used to protect these assets.

4. Company Employees

Take stock of the company’s human capital and seek to uncover any related liabilities:

• Employee Organizational Chart
• Employee Handbook
• Listing of all provided employee benefits
• Documents involving any previous or current government investigations or lawsuits.

5. Company Environmental Issues

If the company deals with environmental waste or is in an industry where they are required to follow strict environmental guidelines, ensure you have:

• Federal and/or state environmental permits, licenses, and audits
• A listing of hazardous substances, and their appropriate disposal methods and processes.

6. Asking the Right Business Questions

Experienced legal and financial advisors can guide you in asking the right questions, ensuring your decision is financially sound and your investment is legally protected. Consider the following:

• How profitable is the business, and for how long has it been profitable?
• Where are most of the customers based, and how long have they been loyal customers?
• Are there any pending financial contracts or transactions that would significantly alter the company’s status?
• Has the company been involved in any litigation? Is any expected?
• Does the company own real estate and will it be included in the sale or leased?

7. The Importance of Experienced Advisors

Purchasing a business involves far more than just signing a purchase agreement. It requires understanding a range of complex issues and making informed decisions. A qualified, experienced business attorney, like those at Coepio Legal, can help you navigate the legal intricacies of the process. Equally crucial is a competent CPA, who can provide critical insights into the business’s financial health, ensuring you don’t overlook any potential liabilities or hidden costs can save you money ten-fold or more than what you may spend on advisory services at the critical pre-closing stage of business ownership. Litigation is expensive, prevention is peace of mind.

Ready to embark on your entrepreneurial journey? Contact us at Coepio Legal. Our experienced business attorneys are here to guide you every step of the way, providing the peace of mind you need to move forward with confidence.

For a free consultation, don’t hesitate to call our office at 415-323-6212. We look forward to helping you achieve your business goals!