Biz tip: Buying an existing small business or franchise

Bridget Weston Pollack, vice president of marketing and communications at SCORE, offers these resources to help you decide if buying an existing small business or franchise is right for you:

When you acquire an established business, you inherit important intangible assets, such as a customer base and brand recognition. Risk is potentially lower than owning a startup because you will have immediate cash flow.

In a due diligence process to determine if the company is a good fit, some financial factors to investigate include: profit and loss statements from previous years, projected financial statement, last three years of tax returns, canceled checks and lease conditions.

Once you find your dream business, you must decide whether to purchase the business entity or just its assets. Buying the “business entity” involves buying the corporation or limited liability company (LLC). You inherit the assets and contracts but also its debts. You may not know what is lurking beneath the surface, such as tax liens or unpaid loans. Buying the “assets” means you are buying the tangible items like equipment and property. However, you must create a new company with new loans, leases and contracts as if the seller’s business no longer exists. (See http://tinyurl.com/no2lzoy .)

Another road to small business ownership is purchasing a franchise where you buy the license of a larger trademarked company to sell its products or services. It is backed by a well-known brand name, training and support from the larger company and fellow franchisees. The success rate of a franchise is usually higher than for an independent business.

Finding your ideal business can be a lengthy, involved process, but after a thorough examination, you may find an existing independent company or franchise is the answer to your small business dreams.

For more information, see: http://tinyurl.com/oftogdo .