Tuesday, May 6, 2014

How to Avoid the Most Common Financial Pitfalls That Come with Buying Businesses

Owning and running your own business comes with a number of benefits. As The Huffington Post writes, running your own company allows you to turn your passions, whether they're for making cupcakes or providing state-of-the-art electronics, into profit. The quote, "choose a job you love, and you will never have to work a day in your life," often attributed to Confucius, sums up the wonders of owning your own business perfectly.
avoiding pitfalls when buying a Florida business for sale

As any business broker can tell you, the space between buying a small business for sale and getting it to the point where you're profitable and enjoying being a new business owner can be fraught with challenges, especially if you aren't careful when it comes to buying businesses. While choosing your Florida business for sale, you should be aware that you may be opening yourself up to some extra costs.

Three Extra Fees You Might See when Buying Businesses
  1. Sales Tax
  2. Depending on where you're planning to buy your new business, you're likely to incur sales tax on a number of items. Most states require you to pay sales tax on capital assets, like office furniture, and consumables, like office supplies. The amount you pay, of course, will depend entirely on the state you're buying in. Contacting your Department of Revenue can help you get an idea of what you'll be required to pay taxes on.
  3. Outstanding Invoices
  4. As Inc. suggests, buying a financially toxic business may seem like a great idea, especially when you see the dirt cheap price-tag. However, buying businesses in this sort of financial turmoil can mean buying their debt as well. One of the most common forms of debt in these situations is outstanding invoices for inventory or services rendered. It goes without saying that putting down tens of thousands or hundreds of thousands of dollars into a new venture only to find you have to make up for the previous owners' debts is not a great feeling.
  5. Audits and Tax Bills
  6. For the Florida Department of Revenue, few things are as important when buying businesses as looking into their tax history. It may sound like a pain, but by contacting your state Department of Revenue, also known as the Department of Taxation and Revenue in some states, you can have an official inquiry launched into the business before you buy. Needless to say, this can help you avoid a huge chunk of debt before you even get started.

Can You Avoid These Costs of Buying a Business? Not all of these costs are avoidable. Although even something like Sales tax can often be minimized when the purchase is properly coordinated by an experienced business broker.  Outstanding debts can also best be dealt with by using an knowledgeable business broker in conjunction with the relevant state authorities. A Florida business broker can help you with the footwork to discover any outstanding debts and also assist with writing some additional safeguards into the purchase contract.  Purchasing a business can give you the professional and financial freedom to live your life as you choose. However, unless you pay close attention, you could wind up with more than you bargained for. Keep these things in mind to avoid any financial headache and don't forget to consult with your accountant, lawyers, broker and other professional advisers.

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