Business
Acquisition
Buying a business is not as simple as buying a piece
of real estate. Sure, a real estate deal is complex
but there are fewer unknowns and potential pitfalls.
A business's success is tied to the market for its
goods and/or services, its ability to beat the
competition, its access to resources, and the
capabilities of its management team and its
employees. A strong business plan is only half of
the story.
Some of the risks involved with starting a business
can be mitigated by buying a franchise or by buying
an existing business. In both cases, much of the
initial groundwork has been laid and many of the
initial hurdles have been overcome. Of course you
have to usually pay a little more for this
head-start on success but that is the cost of
avoiding some of the risks.
Because of the uncertainties of starting a business,
many traditional IRA custodians will not allow IRAs
in their care to participate in such investments.
They are fine with you buying stock in a company but
less inclined to let you get in on the ground floor.
This is well within their rights and is usually made
plain in their plan documents from the start.
However, such risk aversion rarely produces
extraordinary returns.
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