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How to buy a business in the UK

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Buying a business that is already established can be a good way to start out in the business world. However, there are many factors that should be considered before doing so. Take a look at the list below:

  • NDA. Before you are able to see all of the information relating to a business, the existing owner might ask you to sign a confidentiality agreement (also known as a Non-Disclosure Agreement or NDA).  You might also be asked for proof that you are able to raise the funds needed to buy the business.
  • What are you buying? The first thing you should do is look at exactly what is for sale or find out which parts you are interested in buying - only the business assets, for example.  It is important to then check whether the business has full legal ownership of anything you want to buy, as well as warranties and guarantees for major equipment and that any intellectual property is registered and protected. 
  • Existing contracts. Also find out what is involved with any existing supplier and key customer contracts and what these legally require.
  • Discern the assets. Next, you need to decide what the assets are worth and look at the profit-and-loss accounts to value the business as a whole.  You can also obtain information from Companies House if the business is registered.
  • Who owns the business? Other information you will need to check is whether the vendor is legally able to sell the business, as there may be more than one person involved who needs to authorise the sale.
  • Financial considerations. You can ask to see the original business plan, which could bring matters such as outstanding loans to your attention.

    When looking at a business' finance, make sure that you ask for all documentation relating to outstanding loans and debts as well and looking carefully at the profit-and-loss account and balance sheet

    Also check the status of any property that is involved.  
  • Staff. Information about the business' current employees is an important consideration, as you will normally have to continue to employ them.  Ask to see their contracts and look at the wages and other outgoings associated with the company's employees.
  • Information Technology. The IT system the business runs is something else to consider, you could ask questions about its age, value, who it belongs to, guarantees, maintenance agreements and the contingency plans in place for data loss.
  • The environment. You may also wish to speak to the Environment Agency if you are concerned about the environmental aspects of the business and any environmental taxes that may be payable.
  • Protect your data. It is important to comply with the Data Protection Act in respect of any information you have been given access to, particularly relating to employees.  This applies whether or not you go ahead and buy the business.

People who can help you with the process of buying a business and who can offer valuable advice include accountants, lawyers, business brokers, chartered surveyors, corporate financiers and business transfer agents and others who hold the required qualifications and certification. If possible, obtain a recommendation to find someone whose advice you can depend on.  

To conclude, if you decide that buying a business is not for you, you could consider using your skills to do freelance work through a an umbrella company. These, such as Crystal Umbrella, act as an employer for independent contractors who work under temporary contracts, very often through an employment agency, but also directly with end clients.

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