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buying out a privately held business

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curious3tlw

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What is the name of your state? CA

Facts: (1) a small business owner of a retail, brick and mortar, operation, is delinguent on mortgage payments/key vendor bills

(2) employees know sufficient income exists to support business expenses plus profit, yet business is threatened by delinguent bill payment

Question: What options do employees have if they're interested in buying the business from the owner and assuming loans or getting new ones, based on the business financials

Don't know what type of business (sole proprietorship, etc) it is, but am working on finding that out.
 


I am not a lawyer but I own several small businesses. My main concern would be a full disclosure of all of the bills by the owner. If you agree on the basic terms of buying the business from him/her I would get an attorney for sure. I would get the owner to sign a notarized affidavit that there are no other liabilities than the ones that you were told about. This includes potential ones like unemployment claims, threatened lawsuits, merchandise that is actually on consignment etc. I would look closely at the terms of the lease if there is one to ensure that no default exists already and get the landlord to sign a sublease agreement or a new lease with you. If it is a delinquent mortgage you would have to pay the arrears and rent the building from the owner or get a new mortgage. I would also get a non competition agreement from the owner so that your money is not used to set up a competing store near you. You need to include permission to use the name of the business also. It might work out better if you just started fresh in a new location and let the owner go under. Just think of anything that could possibly go wrong and have the attorney write a paragraph to cover it if you do buy it. Do not let the owner talk you into some type of owner financing without a thorough attorney review. Use a business attorney, not a general practice attorney. As far as the financials are concerned I wouldn't trust the numbers unless they are CPA audited and maybe not even then. Banks may lend you money on your personal creditworthiness but not usually on the cash flow and assets of a failing business. Good luck.
 
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