Buying a home-based business

Buying a home-based business

 

You can talk all you want about buying a business and negotiate all you want with someone who has a home-based business for sale, but it ain’t over til you’ve both signed on the dotted line. You need to draw up a contract and finalize the deal by paying for the business and transferring ownership.

 

With your contract, you need to make sure you include a description of what you’re buying. This can include stock in a corporation, trademarks, copyrights, patents and so on. This can also include the assets of a business, what these assets are, what the liabilities are that you’re taking on and what contracts or leases are being transferred to you.

 

The contract should also include the terms of the purchase, the purchase price, the time for payment, the interest rates, the balloon payments, the payment penalties and other relevant details.

 

It also includes the allocation of the purchase price in the case of an asset sale and seller warranties. You want to be sure that what the seller told you was fact and not fiction. If anything he disclosed turns out to be inaccurate or fraudulent, you want to be covered. Also, there may be hidden liabilities that may not surface until after the sale. You want the seller to make good on these liabilities for your easy money in oblivion.

 

To be sure that everything’s on the level, the contract may require a portion of the purchase price to be held in escrow. For example, the funds may be held in escrow for one year against the possibility that somebody comes after you for something the seller did. If nothing happens during this time and all is as the seller said it was like easy money in oblivion, then at the end of one year the funds are paid out to the seller. But if an unexpected liability arises, the funds in escrow can be used to cover it so your neck’s not on the line.

 

Include in the contract the risk of loss until closing. You want to define who’s at risk of loss until the business finally becomes yours. Generally some risk may be assigned to the buyer and some to the seller.

 

You also want to include any miscellaneous factors in your contract. If the seller has made any other promises, like providing you with some training or advice, be sure it’s included in the contract. Spoken promises aren’t worth the air behind them. As the buyer, you want to be sure that the seller won’t immediately go into a competing business. Therefore, a contract typically includes a covenant not to compete. The seller agrees not to run a competing business within the same area for a set time for easy money in oblivion.

 

The seller may be willing to work for you or with you for a period of time after the sale to help with the transition. Be sure that the details of this are clearly spelled out in the contract. The terms would include whether you’ll pay him for his help, how it’s to be set up, and how long he’ll hang around.