If you are considering buying a Florida business, it is important that you do your research.
The seller may be required to disclose certain information.
However, it is ultimately up to you as the buyer to do your due diligence and make sure the business is a sound investment.
Buying a business in Florida can be a complicated endeavor. It is highly advisable that you consult with an attorney who focuses on business acquisitions to protect your interests. But to get you started, here are 6 things you should consider before you buy a business in Florida.
Before closing on the purchase of a business, business buyers must have confidence that they have asked every reasonable question about the business and they have gotten a satisfactory answer to those questions.
Business Attorney Trevor Brewer
1. Types of Businesses for Sale
Depending on your goals and interests, you may want to purchase one type of business entity over another. Limited liability companies (LLCs), corporations, and partnerships represent valuable and lucrative opportunities for prospective business owners. Different industries will have different structures and requirements, so be sure to do your diligence before selecting an entity type.
For instance, buying a dental partnership might be the appropriate entity format and structure. A dental partnership might be ideal to properly run that type of business if you are a dentist looking to set up shop in Florida. However, buying a hardware store partnership might be a headache.
Additionally, when you are buying a business, make sure it makes more sense to buy an existing company rather than start your own company from the ground up. An Orlando business law attorney can help you understand the pros and cons of each option as you contemplate buying a business in Florida.
2. What Is Included in the Sale of the Business?
When buying a business in Florida, you should make sure everything you will need to operate the business is included in the sale.
Perhaps you just want to buy assets, equipment, and inventory that will allow you to start your own new business. Or perhaps it’s actually the name or other intellectual property of the business you are most interested in.
Whatever your intentions, be sure to negotiate for everything you will need. If you are a new entrepreneur or new to doing business in the state, speaking with experts like experienced counsel can help you get the best information about buying a business in Florida. It’s important to discuss your needs with an attorney and have them look over the purchase contract. This way you won’t be taken by surprise later.
3. How Successful Is the Business?
In researching the right business to buy, it is necessary that you have a full picture of the business’s past success and income potential.
Perhaps you are hoping to step into a thriving business and earn immediate income, or perhaps you are hoping to get a deal on a struggling business with the hope of turning it around.
Whatever your goals, there are several things you will want to know.
The Reason the Owner Is Selling
This may be something you need to dig into a bit. It could be that the owner just wants to retire or move on to a different business venture. But it could be that the business has other problems such as:
- It isn’t as profitable as it appears;
- It will need to incur a large expense in the near future;
- Running it is unusually difficult;
- The demand for the product or service has decreased; or
- A new competitor in the area has been luring away business.
Ask around town or talk to employees or vendors to see if you can learn what’s going on behind the scenes. If a business is for sale in Florida, but the owner is not willing to give you any more information about why they want to move on, that may be a red flag that the company or the industry is not as profitable as claimed. Be sure to have an experienced Florida business lawyer review any purchase and sale agreement before buying the business rather than have to handle messy litigation after a sale goes through.
Whether the Owner Has Been Making a Living
If the owner has to rely on other sources of income to make ends meet, this business may not be as solid as it appears, unless you are deliberately buying a part-time business. Ask the owner to let your accountant review their financial records. If you feel like the owner isn’t being transparent about the business’s history, that could be another red flag.
How the Business’s Income Is Affected by Seasonality
Most businesses have certain times of the year that are busier than others. But for some businesses, seasonality can be extreme. Is the business located in a tourist area where the population changes seasonally? Does it cater to an activity that is more popular during some parts of the year?
Seasonality is not necessarily good or bad, but it is something you want to be aware of before you buy a business in Florida. Will you make enough money during the busy season to make up for the off-season? Does operating a business in this way make sense with your lifestyle? If you are looking at seasonal businesses for sale in Florida, be sure that you understand the economics of seasonal businesses and whether the physical location of the company and other attributes make sense for what you hope to achieve.
Whether Demand for the Business Is Growing, Shrinking, or Staying the Same
When buying a Florida business, you need to take a critical look at the local market. Does demand for the product seem pretty stable, or can you see it changing in the near future? Consider things such as:
- Whether local demographics are shifting;
- Whether other businesses in the area are opening or closing;
- How advancing technology may affect the relevance of the product or service;
- How likely changing trends are to affect demand for the product or service; and
- How steady earnings have been over the past several years.
Be realistic about the prospects for your business. You want to make sure that there is going to be continuing demand for the business before you invest in it.
4. What Obligations Will You Be Taking on?
If you are purchasing a new business, it may come with obligations as well as assets. You may be subject to any number of liabilities, such as:
- Existing contracts,
- Pending lawsuits,
- Loans,
- Debts,
- Unpaid taxes,
- Warranties,
- Judgments, or
- Liens.
Be sure to get a comprehensive list of all these liabilities before you buy a business in Florida. An experienced lawyer can be invaluable in helping you identify and understand existing obligations.
5. Is the Asking Price Reasonable?
There are various ways to value a business. The most common include:
- Market approach: comparing what similar businesses are selling for;
- Income approach: using the business’s past and future income to extrapolate its value; and
- Asset approach: determining the value of the business’s assets.
You should seriously consider obtaining a professional business appraisal before agreeing to a purchase price.
6. What Kind of Licensing or Permits Do You Need?
All businesses require some form of registration, licensing, or permits. Depending on the type of business and where it is located, these may include:
- A general business permit;
- DBA (doing business as) registration;
- Business entity registration;
- Professional and occupational licenses;
- Building and zoning permits;
- Health permits;
- Liquor licenses and food permits;
- Tax registration and ID numbers; and
- Environmental permits.
It is important to compile a full checklist of which specific permits you will need and their ongoing cost before buying a Florida business.
Talk to an Attorney
Before buying a business in Florida, talk to the experienced business acquisition attorneys at BrewerLong.
We understand how complex this process can be, and we can give you knowledgeable legal advice at all stages. For more than ten years, our firm has helped Florida entrepreneurs create, build, and protect their businesses. To learn what we can do for you, call or contact us online to schedule a consultation.
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