By: Magna Carta Law Office
Buying a business in Thailand involves a huge amount of money, so the legal and financial aspects of buying a business are extremely important. It is recommended to seek legal assistance and have a competent lawyer and accountant perform due diligence on the existing business you plan to take over. It may provide considerable benefits over starting a new business. An existing business already has an established customer base, an established location, inventory and suppliers, trained employees and a reputation in the market; you only have to improve or keep up on what has already been achieved. When you take over a business, you absorb the people already in place and it takes time to get rid of the poor performers. However, the new owner may struggle to implement changes because the policies and procedures are already in effect. The financial statement of the existing business somehow helps to establish a value for the company. The company may show significant receivables on the balance sheets but question is whether these can actually be collected or will eventually be written off as bad debts.
On the other hand, starting a business involves taking a lot of risks. Many new companies fail, having to deal with many uncertainties especially regarding the profitability and customers’ response to the company’s products and/or services. But you have to consider that when you start a new company, you will be in full control and will be able to develop the business according to your own specifications. You can gather your own management team as you can have the freedom to select the best people you can find and those who can work well with you and as a team.
When you are looking to take over an existing business, it is beneficial to address the current business owner these significant concerns for your assessment:
- It is important to ask for all the documentation that can help you confirm the revenue history of the business. This will give you a clear idea of how the business has been doing over the past years. You may also want to find out how much money has been flowing in and out of the business on a daily, weekly, monthly and yearly basis. Proper accounting of the expenses and revenues will give you a good idea of the potential profitability of the business.
- You need to be aware of any impending legal responsibilities associated with the business. Find out whether the existing owner is aware of any past, current or potential legal disputes related to the business operations. Find out if the business has any contract disputes, employment disagreements, leasing issues, or government regulation issues.
- The business owner needs to provide a financial record of assets and liabilities of the business. Find out what the business owns, and what the business owes. Do the assets outweigh the liabilities? Is the owner aware of any financial assets or liabilities that do not appear in the company’s records?
- It is necessary for you to obtain from the business owner a copy of any written contracts entered into by the business so you can be aware of all contractual obligations.
- The business owner must be required to produce evidence that the business is properly registered with the government agencies in the district in which it operates. Ask the business owner for copies of all documents related to government taxes, which include tax returns, tax ID numbers, and more.