Buying: Frequently Asked Questions
Here are some of our frequently asked questions…
Are there tax benefits in buying a business?
Usually you can take a tax deduction for depreciation on the fair market value of all furniture, fixtures, and equipment at a much faster rate than real estate. The Covenant Not To Compete and the value of training are tax deductible, frequently at high levels. Finally, most businesses have deductible expenses that add to the owner’s cash flow. Always discuss tax issues with a qualified tax
Why not just start my own business?
Government surveys show that over 80% of new businesses fail in the first 3 years, for reasons such as poor location, low product quality, under capitalization, and lack of management skills. This risk can be eliminated by purchasing a quality business with a proven cash flow. The seller will often stay onboard for a period to train you. In some cases they will finance part of the purchase price. This gives you, the buyer, a level of confidence and comfort.
Why use a Professional Intermediary to help purchase a business?
Presenting opportunities for your review allows you to consider situations that you would have an interest and match your own personal acquisition criteria. Using an Intermediary also allows for confidentiality during the initial stages of the buying process. Allowing a professional to lead you through the steps to buying a business will ultimately give you the peace of mind that your interests were protected and your investment well directed. Choosing an individual who is professionally trained, has made a full-time commitment to their career, has access to the largest data base on comparable business sales in the world, and can be trusted to work for your best interest, means you have chosen a Wellstone Business Intermediary to work with you.
Do I need an attorney and an accountant to buy a business?
Buying or selling a business is a complicated process. We recommend having assistance from a professional such as an attorney and/or an accountant.re.
What will the process of buying a business cost me?
Wellstone is generally paid by the seller not the buyer. However, legal and accounting fees are generally required and additional startup costs may also apply.
Will the current owners train me to run the business?
Depending on the complexities of the business the former owner will offer varying levels of training. On most small businesses the owner will offer training for two to four weeks at no cost to the new owner.
How will I know if the income is true and accurate?
As part of the acquisition process you will have to go through “due diligence.” During this period the seller is required to present documents necessary to help you with your decision to buy prior to the closing. You will not forfeit any deposit if the business does not pass your due diligence review.
Will I have to come up with the entire purchase price?
No, while 100% of the purchase price is sometimes required, sellers will frequently provide owner financing to some extent. Additionally a bank may be able to loan up to 80% of the purchase price through a loan sponsored the Small Business Administration.