Factors to be kept in mind before purchasing a new business

The 12^th Global Survey Report released by EY found out that bribery practices frequently occur in the countries at top business organizations. Moreover, there are numerous frauds that are also conducted every year in the companies. Experts say that there are four types of frauds that can happen in a company. They are payroll, double check or over ordering frauds. In order to combat such frauds a number of steps are taken by the company and one of them includes doing a corporate investigation.

Businessmen all across the world are now taking steps before purchasing or entering into an agreement with any new firm. They are now performing thorough investigations on the firm which they are about to acquire. While doing this, there are six important factors that they always kept in their mind. They are given as follows:

Business Finance: This includes investigating the financial statements of the company for the last few years. This might include a check of the balance sheet and profit & loss account. The business debts of the company are also to be checked to be sure that it is not insolvent. All the accounts are mostly checked by an auditor. If the owner is satisfied with the results, it is only then that he or she should enter into the agreement.

Physical Assets: In case one is purchasing equipments from the business, then he or she should not forget to inspect them carefully. It is necessary to see that all of them are in good working condition. The best way to do this is to take an expert who has a very good knowledge of the equipments. If any kind of inventory is left then it is necessary to calculate its salvage value. Even before purchasing any kind of fixed assets one should enquire about the value of the depreciation of the machine.

Lease: One must read the lease agreement very carefully before purchasing a business. It is necessary to read the terms and conditions that specify the tenure of the lease. For instance: if a commercial space is taken on lease for many years, then one must know the number of years that is left on the lease to finish. The owner of the property must be contacted in this case.

Legal Status: There are two types of situations while purchasing a business. Either one is purchasing the assets of another firm or it is purchasing the full entity. It is always better to purchase the assets of a business rather than purchasing the whole firm. In case you are purchasing the entire business entity, then it is necessary to confirm from the business owner that no pending legal cases are there against the firm.

Every year, there are numerous cases which are reported as fraud business deals. But by doing a proper corporate investigation one can prevent such kind of mishappenings. Going through the agreements and other necessary rules and regulations can help you to enter in to a good business deal.

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Created on Dec 31st 1969 18:00. Viewed 0 times.

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