Q: Do I need to form a corporation to buy an existing business in my town?
A: There are several ways to organize a business, a corporation is one of them. You should consult with an attorney in your location.
A: I would need more facts to provide an answer. Is this an asset or stock purchase? Also, there are several types of business entities besides a corporation and this should be discussed with an attorney who knows the facts of your situation. Buying a business is a big deal and you should make sure you start off on the right foot.
You can buy a business via an asset purchase, where you will have to create a corporation or LLC to buy the assets or you can buy the whole corporation. An asset purchase is like having an all-you-can-eat buffet. It allows you to be able to pick what you want and ignore the funny tasting stuff. You have a chance to sample everything and pick only what you want.
In an asset purchase, you essentially strip the business you want to buy to the bare bones. Then you pick the assets you want and leave behind what you do not want. The obvious advantage of this is that you get to see exactly what it is you are buying before you take the plunge.
You also have the added advantage of being able to shed what you feel you cannot carry. This is a very ‘safe’ approach as it exposes you to less risk. However, you will have to form a new entity to hold the assets you have stripped from the old business. This may be a disadvantage as you would have essentially ‘ended’ the old business.
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