FAQs

Purchasing a Business

1. Will the seller finance part of the purchase price?
   Perhaps. Occasionally, a seller is looking for long-term income, perhaps retiring from the business and would be willing to take payments over an extended period of time. You should always ask if the seller is willing to "hold the paper." The interest rate may be lower in this situation.

2. What is due diligence?
   Essentially, due diligence is finding out everything possible about a business before making the decision to buy it and determining a price offer. This is all done on a confidential basis. 

3. Should I buy the assets of a company or the stock of a company? What difference does it make?
   It is generally advantageous for a buyer to buy the assets of a company. It is usually advantageous for a seller to sell the stock of a company.
   
   Buying assets provides a new stepped-up tax basis for depreciation of the assets of the business. Buying assets also avoids being responsible for any undisclosed liabilities of the company.
   
   Selling stock gives the seller capital gain treatment on the sale of the stock. Selling assets results in two levels of taxation. The corporation pays tax on gain from the sale. Then, the shareholders pay tax on gain from the liquidation of the corporation. Selling stock also lessens undisclosed liabilities.