Proper research is a key component of buying a new business. You should begin by contacting a local business broker or looking at some of the online business broker websites. Make sure to thoroughly investigate all your options. Once the desired business is found, don’t neglect the important startup steps of creating a business plan, registering the business, and focusing on the location and financial situation of the company.

The financial status of the business you are about to purchase is eminently important. Be sure to review the revenue and costs closely. Look into trends for input costs of the products you will be producing to see if there is a period of time you may want to limit production. Also examine business operating costs such as the cost of utilities, rent, insurance, and taxes. If there is a mortgage owed by the current owner(s) you must include that cost into your business plan too. When looking deeper into the company’s finances and profits, keep in mind you may need to sign a nondisclosure agreement, promising you will not share their information with any other parties.

The investigation of a business before the signing of any binding contract is known as Due Diligence. The process includes examining past tax returns, viable contracts, and any employee or contractor agreements. Legal documents such as filings, articles of incorporation, and any past or pending lawsuits should also be considered.

These are three steps that should also be considered part of the Due Diligence process, as they should be completed before entering into any business agreements or transaction.

• Obtain all the necessary licenses and permits needed for your business to operate. The amount required depends on your industry and the state in which the business is located. The Small Business Association offers a licenses and permits finder tool to get a listing of federal, state and local permits and licenses you will need to run your business.

• Look into any applicable zoning requirements which may affect your business depending on its type and where you are intending to operate. You can check Stamford’s Zoning Regulations online documentation for a complete list of the regulations within the city.

• Check on any environmental concerns if you are acquiring real property along with the business acquisition. Visit EPA’s Small Business Gateway for more information on any environmental regulations.

Unless you are very familiar with the business for sale, you should look into how successful a location they are working from is. Ask questions like: Is it visible to pedestrians walking near the area? Are there enough parking spaces to accommodate the level of activity you’re hoping to reach? You should also speak with the landlord and ask if they plan to change the rent on the business space once your company moves in.

Changing the name or logo of your purchased business is an important decision. If you don’t plan on making any major changes to the business in the beginning, then it may be in your best interest to keep the original.

If you’ve decided to buy the business, in order to avoid successor liability, you must obtain a Tax Clearance Certificate signifying that there are no unpaid taxes owed. This is required voluntary during transfers of ownership, where there is no form of currency or payment exchanged, as well. If the business still owes taxes, the buyer must include the amount in the purchase price and pay the money owed to DRS. Otherwise, the buyer becomes personally liable for the amount of taxes, interest, and penalties owed on the business.

When you purchase a business, the Connecticut Department of Labor states that the purchaser of the existing business will become a full or part successor of the previous employer's unemployment liabilities. When registering for the unemployment insurance tax, (UC-1A) you will need to know this information about the company you are purchasing:

• If you be acquiring all or part of the employees, assets, organization, trade name and business of the previous employer
• The current Trade Name of the business
• Name and address of previous employer
• Previous employer's registration number
• Whether or not the employer remain in business in Connecticut

Determining a fair price for the business can sometimes be a difficult undertaking. There is a variety of valuation methods that should be taken into consideration. Here are a few:

• Capitalized Earning Approach: Focus placed on the return on the investment that is expected by an investor

• Excess Earning: Similar to the capitalized earning method, except that it separates return on assets from other earnings

• Cash Flow: Typically used when attempting to determine how much of a loan the cash flow of the business will support. This information can be used as a benchmark to measure the firm's ability to take on debt.

• Tangible Assets: Values the business by total tangible assets.

• The value of Specific Intangible Assets: This method compares buying a wanted intangible asset versus creating it.

Legal counsel is advised for this final step in purchasing a business to review all the documentation regarding the transfer of the company. The specific process of closing is comprised of the following:

• Adjusted Purchase Price This will include rent, utilities, and inventory until the business closes.

• Review Required Documents Including a corporate resolution approving the sale, evidence that the corporation is in good standing, or any tax releases that may have been promised by the seller. For more information, go to your local department of corporations or Secretary of State.

• Signing Promissory Note The seller may sometimes have back financing, so have an attorney review any and all note documentation provided.

• Security Agreements Lists the assets used for security purposes as a promise for repayment on the loan.

• UCC Financing Statements Uniform Commercial Code documents are recorded with the Secretary of State in the state you will be purchasing your business.

• Lease: Make sure that you have the landlord's concurrence if you agree to take over the lease. If you are negotiating a new lease with the landlord, make sure both parties are in agreement of the terms of the new lease.

• Vehicles: If the purchase of the business includes vehicles, you may have to complete transfer documents for the vehicles. Check with your local Department of Motor Vehicles to determine the correct procedure and necessary forms.

• Bill of Sale: Proves the sale of the business. It also explicitly transfers ownership of tangible business assets not specifically transferred on their own.

• Patents, Trademarks, and Copyrights: If there are any patents, trademarks and/or copyrights associated with the business, you may need to complete the necessary forms as part of the transaction.

• Franchise: If the business is a franchise, you may need to complete franchise documents. Visit the Consumer Guide to Buying a Franchise for more information.

• Closing or Settlement Sheet The closing or settlement sheet will list all financial aspects of the transaction. Everything listed on the settlement should have been negotiated prior to the closing.

• Covenant Not to Compete It is a good idea to have the seller sign an agreement to not compete against the business. This will help prevent any interference from the previous owner.

• Consultation/Employment Agreement: A necessary process for legal purposes if the seller is agreeing to remain on for a specified amount of time.

• Complete: IRS Form 8594 - Asset Acquisition Statement. This document will indicate how the purchase was allocated and a number of assets, which are important for your tax return.

• Bulk Sale Laws: Make sure that your business complies with bulk sale laws, which govern the sale of business inventory.