Posted by: May 24, 2024

You’ve always wanted to run your own business and recently noticed a local, small business for sale in your neighborhood. Now seems like the perfect opportunity to buy that small business. So, how do you buy a small business in Houston? What is involved in a small business acquisition (SBA) Houston?

Buying an existing small business can have many benefits but can be complex and time-consuming. Working with experienced legal counsel is essential to ensure a smooth process, that your rights are protected, and that no party is taken advantage of. Even if you work with a business attorney, it is valuable to understand the basics of SBA and a few key questions to ask when buying a small business. 

Key Questions to Ask When Buying a Small Business

If you’ve identified an existing small business in Houston that you want to purchase, you should ask several questions to determine its viability and whether it is worth buying.

Why Are They Selling the Business?

One of the first questions to ask an existing business owner is why they are selling. Their answer can impact your decision to buy and give you insight into the current state of the business. For example, if the owner says there are financial issues or the company is struggling, you may not want to purchase it. But if they are selling because they have health concerns, want to relocate, or hope to retire, it might be a perfect opportunity to step in and pick up an already successful business.

What Is the Financial Health of the Business?

Before making a significant business purchase, you should know whether the business is financially thriving or struggling. You may want to inquire the following:

  • Are revenues rising or declining? 
  • What current debts does the business have?
  • Are there accounts past due?
  • Is the company writing off any bad debts?
  • Does the business have adequate working capital?
  • How has the business been valued in the past?
  • Are there any liens against the business?

In addition to these questions, ask the owner to provide you with financial documents, such as:

  • Profit and loss statements;
  • Financial statements for the current year;
  • Cash flow statement;
  • Tax returns;
  • Debt disclosures; and
  • Balance sheets.

Thoroughly review the financial records to confirm their accuracy and clearly understand the business’s financial health. If you notice red flags, numbers that don’t add up, or things that appear missing, there may be cause for concern. Investigate the information with the help of a business attorney and an accountant to understand if the business is a sound investment. 

What Assets Are Part of the Sale?

Before purchasing a business, you should know exactly what assets are part of the sale. Knowing the included and excluded assets can help you grasp the company’s value. Some questions for the owner about the assets may include: 

  • Does the business own any intellectual property? If so, will the rights transfer to you in the sale?
  • Is there real property (buildings, land) that is included?
  • Does the business lease or own the locations? 
  • Can you assume the lease or mortgage?
  • Does the business lease or own its equipment?
  • Does the business have current permits, licenses, or certifications that can be part of the sale?
  • What is the company’s reputation?

These are only a few key questions when preparing to buy a small business. An experienced business attorney can help you prepare additional questions about what assets and liabilities will be included. They can also negotiate which assets to include or exclude and provide guidance on further financial and legal questions. 

Financing a Small Business Acquisition

A critical step in making a SBA is securing the funds needed to make the purchase. Houston small business owners have a variety of financing options to get started. Some potential funding sources include: 

  • Small business bank loans,
  • Small business grants,
  • Credit cards,
  • Non-profit lenders,
  • Angel investors, and
  • Crowdfunding. 

The Texas Governor’s Office of Small Business Assistance also provides information on SBA funding sources and partners that can be useful for obtaining capital. 

Speak with a business attorney to understand these options and which will be best for your business purchase.

The Curley Law Firm Can Help You Buy a Small Business in Houston

Buying a small business can be complex and stressful if you are unfamiliar with the legal and financial considerations. The Curley Law Firm has been helping clients navigate how to buy small businesses in Houston for over 16 years. Adam Curley has experience taking his clients step-by-step through the process of identifying healthy businesses, requesting and reviewing due diligence documentation, drafting letters of intent, negotiating pricing, securing financing, and closing deals. He can also offer guidance on tax implications, liability protection, risk assessment, and corporate governance.

As a solo practitioner, Adam can give individualized attention to each client and take the time to understand each client’s needs and business goals. Contact The Curley Law Firm today to learn how Adam can help you realize your dreams by purchasing that small business you have always wanted.