Many entrepreneurs get their start in the world of business by buying an existing company rather than starting their own. Many people see this as a less-risky endeavor, although it still comes with plenty of challenges.

There are numerous steps you will need to take to ensure you are making the right move and covering all your legal obligations as you move ahead with the purchase of a business. Our experienced attorneys have compiled a simple checklist below:

Getting started

When you first begin the process of looking for a business to buy, you should be clear to do the following:

• Determine your interests: To start, any business you wish to invest in should be in an industry that’s of some interest to you.
• Know your talents and skills: Certain unrealistic business ventures can be eliminated if you are honest with yourself about your experience and talent.
• Quantify the investment: It’s not always easy to find profitable businesses for sale at reasonable purchase points. You should understand why the business is being sold at the price it is, and then determine how much you are willing to invest.

Conducting due diligence

Next, you will need to address certain issues before you enter a business transaction. These include the following:

• Obtain all licenses and permits: Most businesses require certain licenses and permits to operate. You should have as many of those as is available prior to assuming ownership of a company.
• Check zoning requirements: These requirements could affect the type of business you wish to operate in a certain area.
• Address environmental concerns: If you are also acquiring real estate with the business, you should make sure you have a cohesive understanding of the state of title with the property and any relevant environmental regulations.
• Determine the business’s value: There are many ways you can determine the value of a business, including capitalized earning approaches, excess earning methods, cash flow methods, values of tangible assets and values of specific intangible assets.
• Craft a letter of intent: This letter should include your offer figure, the terms of the purchase and conditions for the sale.
• Create a confidentiality agreement: This agreement should indicate that you will not use any information about the seller’s business for any reasons outside of the purchase.
• Review financial statements: You should look at financial statements from the last several years to ensure the business is in good financial standing. This includes tax returns, audit information and anything else that provides an accurate financial profile.
• Check other important documents: These documents could include property documents, sales records, customer lists, advertising materials, contracts, leases and employee and management information.
• Prepare for closing: At closing, you will need to address items such as the adjusted purchase price, promissory notes, security agreements, leases, franchising issues, non-compete clauses, employment agreements and tax information.

For more detailed information and guidance when purchasing a business in the U.S. Virgin Islands, consult a skilled business transaction lawyer.

Tom Bolt is Managing Attorney of BoltNagi, a widely respected and established business and corporate law firm serving clients throughout the U.S. Virgin Islands.