Business Structure

Once you find a business that you may be interested in, you must determine what type of legal entity owns the business. This will affect your purchasing strategy as well as the eventual price.

Sole Proprietor

Under a sole proprietorship, the business is owned in an individual capacity. The assets are held in the name of the owner of individual or individuals who own the business. Therefore, when buying a sole proprietorship you should determine if you are buying just the assets or both the assets and liabilities.

Partnership
Under a partnership, the business is owned by a group of two or more entities. This could prove more difficult, therefore it is important to see the partnership agreement to make sure that the people you are dealing with have the authority to act on behalf of the partnership.

Corporation

When you are buying from a corporation it is important to determine the best way to structure the purchase. You must determine if you are going to buy the corporation itself (stock purchase) or buy the assets only leaving the original corporation intact. In most situations you will be much better off buying the assets of the corporation rather than the corporate stock. The following are advantages of purchasing the assets vs the stock: