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Buying An Existing Business: Test Your Knowledge About Buying a Business

Buy or Sell a Business / Buy a Biz, Quiz

0%

Buying a Business

Welcome to Buying a Small Business Quiz!

This quiz will test your knowledge about what it takes to buy and existing a small business. Are you ready to put your knowledge to the test?

1 / 10

When should you conduct due diligence on a small business you are considering buying?

After signing a purchase agreement

After meeting the seller

During negotiations

After submitting a letter of intent

2 / 10

How are most small businesses sold?

As an asset sale

As a franchise sale

As an earnout sale

As a stock sale

3 / 10

What is the downside of buying a small business as a stock sale?

It does not include the company’s assets

Buyers assume potential unknown liabilities of the previous owners

It causes the sale to be taxed twice, known as double taxation

The business history is lost

4 / 10

When buying a business as an asset sale, what happens to the business debt?

The new owner usually assumes the business debt after the closing

The seller usually splits the business debt with the buyer

Most of the time, the business debt remains with the seller

The business debt is deferred until the next sale or dissolution of the business with a 1031 exchange

5 / 10

Which of the following statements about non-compete agreements is true?

Non-compete agreements are always enforceable in court

Non-compete agreements are only enforceable if they are reasonable in scope and duration

Non-compete agreements are rarely enforceable in court and only serve as a way to fund a sale

Non-compete agreements are only enforceable if they do not place any restrictions on the seller

6 / 10

What is an earnout agreement?

A contingent payment that the seller only receives from the buyer when specific performance targets are met

An agreement to pay the seller a series of fixed payments for an agreed-upon number of years

An agreement to pay the seller a portion of the profits for a set period of time

None of the above

7 / 10

What is the best way to determine the value of a small business?

Using the owner’s estimate

Looking at the company’s balance sheet to determine its book value

Hiring a professional business appraiser

Ask your CPA to compute it

8 / 10

What is an important factor to consider when negotiating the terms of a purchase agreement for a small existing business?

Ensuring that the purchase price is significantly below the current market value

Including contingencies that allow the buyer to back out of the deal at any time

Making sure that the seller is still involved in the business after the sale

Including specific provisions to address any potential liabilities or risks associated with the business

9 / 10

What is an important legal document to review when buying an existing small business?

The seller’s personal tax returns

The seller’s business plan

The seller’s financial statements

The seller’s operating agreement or articles of incorporation

10 / 10

What is an important factor to consider when determining how much to offer for an existing small business?

The amount of financing the buyer can obtain

The current owner’s sentimental attachment to the business

The current market value of similar businesses in the area

The age of the current owner

Your score is

The average score is 58%

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The advice and opinions presented here are intended to serve as general guidance and educational tools employed by Steven Imke. Users are advised to use this information under the supervision of a qualified professional or at their own risk. Steven Imke and associated entities disclaim any liability arising from the use or reliance on the information provided.

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Buying An Existing Business: Test Your Knowledge About Buying a Business

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If You Found Our Content Hepful Click Here To Give Us Some GOOGLE Love

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1 thought on “Buying An Existing Business: Test Your Knowledge About Buying a Business”

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