Breadcrumbs

Are you buying an existing marijuana business? Two people you need to hire!

520If you’re buying a business or even just some of the assets of a business, be aware that you may inadvertently be buying past liabilities, workers’ compensation and unemployment insurance experience ratings, as well as unpaid debts.

Understandably many see gold when they look at the cannabis industry.  The "If you build it they will come" mentality will overwhelm common sense and leave many would-be entrepreneurs realing when they realize their "Golden Goose" is nothing more than a spray-painted pigeon.

Do Due Deligence

Due deligence is a fancy term for "Do your homework".  Hiring an accountant and a lawyer who specializes in business aquisition is a must.  Accountants will be able to see blatant ommissions on the balance sheet.  Did the previous owner pay themselves?  Did they take legal tax deductions?  Are tjheir any major expenses missing which will dramatically effect the bottom line and most importantly, what you will pay for the business?  A good accountant knows all the trick used to inflate the bottom line.  They also know how to verify tax returns have been made and if their are any unpaid tax liabilities.  The bottom line is, always pay for expertise you do not have.

A lawyer specializing in business acquistions is invaluable.  They will be able to invesitigate if there are any legal prceeding pending with the business you are about to acquire.  Even the most mundane of legal issues can easily cost tens of thousands of dollars.  However the most valuable part of having a good business lawyer is the construction of business acquistion contact.  There are a number of things you have to protect yourself from.  Having properly constructed contigencies will protect you thoughout the process and save you deposit money and protect you from liabilities that can occur before the business transaction is signed.  Having a lawyer will also help solidify a contract preventing previous business partners from trying to claim ownership, as well as shield you from regulatory legal liabilities. 

In the end, purchasing and existing business has too many moving parts not to seek out expert help.  Running a successful business is challenging enough.  Getting blind-sided because you did not do proper due deligence can have costly, but avoidable consequences.

 

 

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