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Mistakes that are commonly made when purchasing a company

| Feb 5, 2020 | Buying Or Selling A Business |

There are several mistakes that entrepreneurs in Louisiana and elsewhere tend to make when purchasing their first businesses. For instance, they may take on more debt than they can afford to repay. Individuals who spend too much to acquire a business may not have the cash needed to pay employees or take other steps to expand the company.

It is also a mistake for a person to purchase a business that he or she is incapable of running. An entrepreneur who doesn’t have the skills, knowledge or passion for a given industry is wise to stay away from companies within that sector. Regardless of what type of business a person wants to buy, it is important to do due diligence before completing a transaction. At a minimum, a buyer will want to know why the company is being sold. He or she will also want a clear idea of a company’s financial health before agreeing to become its new owner.

A due diligence team can help decipher financial statements and other records that a seller provides. Buyers should never accept anything that a seller says without verifying that information first. Even if a company seems like it is doing well today, a seller won’t necessarily disclose any problems that it has now or could have in the future.

When buying or selling a business, it is important to have as much information as possible before the transaction is final. An attorney may be able to help buyers obtain as much information as they need to make an educated decision about whether a company is worth buying. Legal counsel may also help buyers pursue legal action if a seller withheld information or otherwise misrepresented the state of his or her company.