Quote:
Originally posted by onetime2
Current liabilities of the business- the obvious ones are debt for land, buildings, equipment, etc and whether they will be paid off in the transaction or you need to assume them. The not so obvious ones are debts to distributors or suppliers and the current business owner's standing with them.
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Not quite accurate about the definition of current liabiliites. Some accounting 101 for our business buying friend here:
Liabilities - money you owe someone, give or take.
Current liabiliites - liabilities that are due to be paid within 12 months of the date of the financial statements.
Noncurrent liabilities - laibilities due more than 12 months out.
Now, usually when you purchase buildings/cars/equipment, etc., you enter into a note payable, with periodic payments, like your mortgage. Some of your payment will be interest, and some will pay down the debt (principal reduction). Whatever portion of the long-term debt that will be payed down by these periodic payments within the next 12 months will be classified as current (usually depicted as "current portion of long term debt" on the current asset portion of the balance sheet). The rest of the debt will be classified as non-current.
If you do assume a lease, though, you will need to know when the lease payments are due (what day of the month, crucial if you have a long collection period on your receivables - which is not likely for gas station/bars) and how much, to plan your cash flow. Also, how are you going to buy out the current owner? You're more than likely going to need to borrow against the company to pay him off, which will add more debt payments to your business.
And as far as incorporating, be careful if you do it yourself.