Business Structures
It is important to find out how the company is structured legally. The type of business structure used will affect your purchasing strategy as well as the eventual price.
Sole Proprietor
Under a sole proprietorship, the business is owned in an individual capacity. The assets are held in the name of the owner, individual, or individuals who own the business. When buying a sole proprietorship, you should determine if you are buying just the assets or both the assets and liabilities.
Partnership
Under a partnership, the business is owned by a group of two or more entities. This could prove more difficult; therefore it is important to see the partnership agreement to make sure that the people you are dealing with have the authority to act on behalf of the partnership.
Corporation
When you are buying from a corporation, it is important to determine the best way to structure the purchase. You must determine if you are going to buy the corporation itself (stock purchase) or buy only the assets, leaving the original corporation intact. In most situations, you will be much better off buying the assets of the corporation rather than the stock. The following are advantages of purchasing the assets alone:
* It helps you avoid the liabilities of the existing business,
* It gives you receive significant tax advantages,
* It helps you avoid acquiring unwanted assets from the corporation, and
* You are generally able to get a higher tax basis for depreciable assets, which means there's less taxable gain to report if you sell the assets later.
There are some circumstances when purchasing the stock of the corporation has its advantages. One common example is when the corporation has a uniquely valuable asset that can't be transferred. An example of this would be a lease with an option to renew that is not freely assignable. The availability of keeping the current location may make it more advantageous to purchase the corporation's stock.
Business Structures - To learn more about this author, visit Start Your Business's Website.
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Start Your Business
(Visit Start Your's Website)
Starting a business requires you to
complete a number of steps and make some
key decisions. Though part of your overall
plan, you’ll need to select a location,
decide on a business structure, and obtain
the necessary licenses and permits. In
addition, determining which financing
options will meet your short-term needs
and long-term goals is crucial. Within
this section, we’ll provide information on
these topics along with guidance on buying
an existing business, copyright and
trademark issues, and getting support from
an outside expert.
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