Folks,
I am trying to buy part of a small business. It has two partners and one of the partner is trying to sell it to me. When I looked at the books and their last annual return, I see they have made a loss of about 50K last year. Though they say they are doing well now, I see from current books that they continue loosing something in the order of 5 grand a month. All in all, not a healthy setup.
But I am still keen to get this knowing well the status. This is where I am looking for some guidance. I know I have to speak to my solicitor, accountant etc., but just looking for some preliminary advice.
(1) Would it be absolutely foolish to venture into this kind of deal or does this happen all the time ? i.e. Do people buy loss making business ?
(2) If so, If I become a director by buying 50% of the share, would that mean that I am taking all their liabilities including any bank loans, debts to creditors etc.,
(3) Would it be better to ask them to close that company, start a new one with a fresh slate and become a partner with the other person who wants to stick on in the new company? Would that mean that I carry no liability from the previous company and all I need is to tackle the 5 grand loss per month.
(4) What are the things that I need to ask them to clear before I proceed with the next step ?
Any tips would help me to have a better discussion with the seller and my accountant. Thanks in advance.
I am trying to buy part of a small business. It has two partners and one of the partner is trying to sell it to me. When I looked at the books and their last annual return, I see they have made a loss of about 50K last year. Though they say they are doing well now, I see from current books that they continue loosing something in the order of 5 grand a month. All in all, not a healthy setup.
But I am still keen to get this knowing well the status. This is where I am looking for some guidance. I know I have to speak to my solicitor, accountant etc., but just looking for some preliminary advice.
(1) Would it be absolutely foolish to venture into this kind of deal or does this happen all the time ? i.e. Do people buy loss making business ?
(2) If so, If I become a director by buying 50% of the share, would that mean that I am taking all their liabilities including any bank loans, debts to creditors etc.,
(3) Would it be better to ask them to close that company, start a new one with a fresh slate and become a partner with the other person who wants to stick on in the new company? Would that mean that I carry no liability from the previous company and all I need is to tackle the 5 grand loss per month.
(4) What are the things that I need to ask them to clear before I proceed with the next step ?
Any tips would help me to have a better discussion with the seller and my accountant. Thanks in advance.