Before anyone buys a business, accountants and lawyers should be consulted. An experienced accountant can review the businesses books and tax returns. These documents will provide essential information on the true value of the business and potential federal and state tax liability.
Even with a good accountant, a prospective owner still needs a lawyer to draft the sales and indemnification agreement. Recently, a new business owner complained about being sued for actions taken by the seller. Of course, he didn't have a sales agreement. He thought he would save money by drafting his own bill of sale.
The inherited liability he incurred may damage the business and turn his ownership dream into a financial nightmare. An experienced attorney would have drafted a sales agreement with covenants and representation provisions regarding known tax liabilities, lawsuits, and other contingent liabilities. In addition, indemnification clauses would have required the former owner to reimburse the buyer for any judgments, expenses, and attorney's fees incurred as a result of enumerated pre-sale liabilities.
In short, even for prospective small business owners, paying an accountant and a lawyer a few thousand dollars before the sale closes may save tens of thousands of dollars in the future.