What You Need to Know About Buying a Small Business

If you are planning to purchase a small business there are many options for you. You can purchase the company’s assets and make it your own or you can purchase the company itself or even purchase shares from the company as well. Purchasing the assets means that you need to have experience in carefully assessing those assets so that you can avoid being tied to any company debts. Any assets that include some form of title should be transferred into your name to finalize the process. When assets are purchased by the target company, taxes are paid on the proceeds of the sale.

Notes About Stock Purchasing

If you are planning to purchase a company’s stock, you can purchase all of it or just a majority of those shares. Once you become a shareholder you’ll be able to have more say in appointing officers and other operations of the company. Target companies are often more lenient on approving the sale of shares over assets. This is always preferred because taxes are not paid on the sales of shares and there are lower tax rates on the profits of shares.

Mergers and Takeovers

In the case of a merger, a “surviving company” can issue new shares and use them to buy shares of the “target company”. Once a company buys the assets of another, titles are changed into the major company’s name to make it their own and the surviving company is also renamed. Those that have a stake in the new company are now target company shareholders. If you are purchasing a franchise this is not considered a takeover of any kind. You simply only get the right to use the company name, logo, and their recipes and formulas. This does means that you will not be able to advertise independently simply because buying a franchise means that you will have to follow the company’s restrictions.

The laws can be complicated regarding mergers, acquisitions and franchises. If you are preparing to engage in any of these you’ll need to seek the assistance of an experienced business lawyer.

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