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.
|
MEMBERSHIP
678-792-3876 (General
Info)
