What Do I Need To Know Before Investing In A Business In Florida

Is investing in a business a good ideaInvesting in a going concern may be an alternative to more traditional investments like stock or real estate markets. Any investor should start by requesting to examine the corporate formation and corporate governance documents as well as its books and records.Florida law requires businesses to maintain certain books and records. These can illuminate how the business has been operated. Given that these are sensitive internal business documents, you should expect that the business may require you as an investor to sign a confidentiality and non-disclosure agreement. An NDA is a prudent step that demonstrates sophistication and protects the business from anyone who might choose instead to compete against it with its own data.What due diligence should I doThe primary goal of business due diligence is to test the veracity of the representations of the seller. The due diligence that you should consider undertaking before investing in a Florida business can include reviews of the internal financial operations, online business health, and verification of assets.Your due diligence may also include, investigating the community where the business operates and customer demographics. In addition to business lawyers, financial professionals like CPAs together with valuation experts and business brokers can provide good assistance and guidance in determining the health of a business.Can I totally rely on the company’s representationsYou are entitled to rely on certain representations by the company. But relying on representations of the business without performing any independent verification may place you in a precarious position later. You may also incur substantial litigation expenses that you could have avoided.Florida law has grown increasingly complex as to whether reliance is justified and proper. A significant factor is the degree to which a representation impacted your ability to verify information.Business investors who fail to conduct any pre-purchase investigation or due diligence essentially fail to plan and consequently have a plan to fail. Upon identifying an investment opportunity a better approach is to retain qualified experts to help you in the due diligence process. A good business lawyer will also help identify representations on which you might need to focus to avoid problems later.How do I document my investment in a businessWhen you invest in a business you want your investment clearly documented in the corporate books and records. Before committing to invest it is prudent to seek the advice of a good corporate lawyer as to how best to document the investment.It is equally smart to seek advice from your financial or tax advisor as to how to structure the investment. Consulting with such professionals helps you to understand the liabilities that you may potentially assume. It also allows you to decide how to structure and document the investment to minimize that exposure if that is your goal.ConclusionInvesting in a business is a personal decision. It should be made only after substantial due diligence and investigation. It is also important to document that investigation and the representations of the business made therein. While all problems may not be completely avoidable, a solid business lawyer can guide you in the process and significantly reduce those for you.