Buying a business can be a complicated process, but one which can offer plenty of benefits. Buying an established business that you can grow can be much easier than getting your own start-up off the ground.
Of course, things are never that simple, so if you do decide to buy a business there are so many things to consider. How do you take over from the previous owners? What paperwork do you need to file? We’ll be covering all you need to know about buying a business below.
What’s the business worth?
While the seller will have their business valued themselves, it’s important that a buyer conducts their own investigation into the business’ value. This includes looking through financial records, assets, turnover and profits. It’s a good idea to get the help of an expert with experience in valuing businesses, to help you make a sound decision on how much to offer.
If the business you’re thinking of buying is a limited company, then typically, the owner(s) will have their own shares to sell, but there may also be other shareholders in the picture. What happens when a new owner buys the business?
It’s essential to understand exactly what you’re buying and how much of the business you will own. This could mean you have to buy out everyone’s shares if you want full control.
If the sale goes ahead, Companies House must be notified of the change in shareholder structure using an SH01 form.
A letter of intent is an important part of any business sale. It’s a formal agreement between a buyer and seller regarding their plans, intentions and terms of the business sale. This letter should go into detail about what you as the buyer plan to do with the business. It should also cover exactly what the seller is selling, and any conditions that need to be met before the sale can go through. This is so everyone has a clear picture of the deal laid out before agreeing to it.
Selling patents and intellectual property
When there’s the matter of patents and intellectual property, things get a bit more complicated. You could decide to buy a patent, or simply buy the license to use the inventions in question. Buying it outright might be the simplest option, but it still comes with its fair share of paperwork (and cost).
Licensing is more of an ongoing process which many sellers prefer as it’s a constant stream of income for them. In this case, the patent owner will earn royalty payments on future sales involved with the patent.
Hire a professional to help
When it comes to selling or buying a business, it’s tempting to forgo all the formal paperwork to save money and time, but this might backfire if you’re not entirely sure of every single detail involved.
There’s so much that can go wrong in a business sale, especially as these could turn into issues which grumble on for years. Get everything written up with legal guidance when it comes to shares, patents and business values.
If you need any help dealing with shares, business valuation or other business financial needs, get in touch with one of our dedicated online accountants for professional help and advice. Ask for an instant quote, or call 020 3355 4047.
Want to learn more?
Subscribe to our newsletter to get accounting tips like this right to your inbox
About The Author
An experienced business and finance writer, sometimes moonlighting as a fiction writer and blogger.