When you buy a business, you obviously want to make sure it's a business you personally want to get into and that it will be a good one to make profits. You also want to check into some of the finer details to protect your investment. Here's what you should do before you finalize the transaction.

Know the Licensing Rules

Virtually all businesses have to get some kind of license or permit. For many, this is just paying a small fee and getting a formal OK to operate at a given location. More specialized businesses or those who have public health concerns may have additional requirements. You need to make sure that the business you're buying is current on any such requirements to avoid legal problems. You also need to find out if any licenses and permits will automatically transfer to you, whether you need to fill out paperwork or pay fees, and whether there's a chance the government won't approve you.

Check for Debts

When you buy a business, you generally buy everything that it owns and owes. There are ways of structuring a transaction to avoid this, but it's hard to avoid taking on business debts entirely. What this means is that you need to make sure that you know all of the debts that a business owes before you buy it.

This doesn't mean a business in debt is a bad buy. In fact, buying a business that's in debt to turn it around is often a good investment. You just need to avoid surprises and know how much to reduce the purchase price to account for the debt.

Review Current Contracts

You should also go over all of the business's contracts with your attorney. This is especially true when you're expecting to take over existing contracts that make you money. If key customers have a right to get out of their contract after the business is sold or their contracts are expiring soon, you need to take into account the risk of losing that income.

You also need to remember that you're going to have to complete any outstanding contracts even if you think it's a bad deal. Even if you didn't sign the contract, the business that you want to take over entered into the agreement and has to follow it.

To learn more about what you should do when buying a business, contact a local business transaction law services firm today.