What should I check before buying a home-based business?

A business run from the seller’s home looks simple: no lease, low overhead, few moving parts. That simplicity can hide the fact that much of the business lives in the seller’s house and the seller’s habits. Before you make an offer, work out what you would actually receive on the day the seller hands you the keys, and what stays behind.

What transfers and what stays

The home stays with the seller, so ask what moves. Equipment, stock, a phone number, a website, customer lists and supplier accounts may transfer if they are separate from the household; confirm with your lawyer. Make a written list of every item and account and confirm each is truly the business’s to sell.

Books mixed with household spending

Home-run businesses often share costs with the household: a car, a phone line, utilities, a room. The profit you are shown may be affected by what was or was not charged to the business. Ask your accountant to sort which costs would continue under your ownership and which would not.

Reliance on the owner and the address

Ask how much of the work, and how many customer relationships, depend on the seller personally. Also ask whether customers and suppliers know the home address, since moving can cost you some of them. A transition period with the seller helps, as covered in taking over a home-run business.

Can it run from your place

Do not assume the business can simply move into your home. Ask your municipality whether the activity is allowed there, and tell your insurer exactly what you plan to do. If you rent, check your lease and speak to your landlord. Request tax and sales records, customer and supplier lists, and any contracts that transfer.