Buying a business does only mean a transfer of legal responsibilities. It also means that any tax problems the business had under a former owner will transfer to the new owner, as well.
Some important questions to ask include:
- What is the current tax status of this business?
- Do the owners owe any back taxes?
- Have the owners been penalized for not making tax payments on time in the past?
- Has the company been penalized for not making tax payments on time in the past?
- Has the company ever been audited?
- If so, what were the findings of the audit?
- Are the company financial records clear and easy to understand?
- Does the company use an independent accountant, or is the accountant in-house?
If the business has problems with the IRS, this could be an indication of more serious problems with the owners or with the business model itself. It is important to remember that any tax and financial troubles will change hands when the business transfers hands.
