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Can I buy an existing limited company (BV) instead of setting up a new company?
It is possible to buy an existing BV. But you will have to be sure that there are no hidden (tax) claims in the BV. Since setting up a new BV should not take a lot of time it may be better to follow that procedure.
Buying an existing company also has to go through a public notary. You may also want to perform an audit on the administration of the existing company whereby you must audit all the tax assessments. The company may also have other liabilities towards third parties. Consequence is that buying an existing company can take more time and cost more money than just setting up a new one.
If you want to take over a running business with customers and assets on the balance you will also have to perform an audit on the administration and make sure that the price you pay for it is covered by the value of the business and the future profitability.
The main advantage of buying a – successful – existing business is that there’s usually an existing business model in place, particularly if it’s been around for several years.
Other advantages include the following:
- the product or service has already succeeded in the marketplace;
- there’s an existing customer base;
- policies, procedures, and business models are already established;
- staff is comprised of well-trained brand ambassadors.
All of these inherited assets can allow you to invest more time in essentials like marketing and enhanced customer service. What’s more, financing is often easier to secure for an established business rather than an entirely new business.
One of the disadvantages of buying an existing business can be the difference between the dream and the reality. While you may dream about operating a trendy business, a lack of any related business experience on your end may turn the dream into a nightmare.
Other disadvantages to consider:
- The cost of purchasing the business, plus legal and accounting fees for the transition will likely exceed those of starting a new business.
- Trained staff. The same advantage can be a disadvantage if you inherit disgruntled workers. They may also feel resentment about a new boss coming in and “changing the system.”
- Customer base. While there may be one, it doesn’t necessarily mean that it’s in great shape or that customers will trust the new owner. If the business has been coasting for a couple of years and its reputation has been on a downswing, then new owners may have a lot of hard work ahead of them in retaining and getting new customers. The customers may also have a personal relation with the person from whom you bought the company. If this person is out of the picture your clients may also go away.
- Finances. Do you have the finances to keep the business running if profit is less than you expect? Consider every expense—including your paycheck—and take a close look at annual revenues. Are they rising every year, remaining flat, or going downhill? And will you be able to wait it out if the change of ownership results in a dip in revenue?
Review inventory, as well as policies, procedures, and any outstanding contracts as they could be outdated or obsolete, requiring significant amounts of time or money to get them up to speed.
Situations will vary depending on the business you’re considering and how much of a personal touch you want to put on your business. Only you can decide whether buying an existing business is right for you, but weighing out these pros and cons can get you on the path to making the right decision.
Expatax can assist with the accounting requirements.