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Make sure your business is ready for a merger

On Behalf of | Aug 27, 2021 | Business Law |

Merging two businesses can be a complicated process. Although you may feel prepared for this step, it is also important to make sure that your business is ready to merge with another company. Before you begin the merger, there are several steps that you should take.

The U.S. Small Business Administration says that a merger creates one legal business. Your company will add the staff and resources from the other company. Additionally, the business may need new permits and tax IDs. Because this is a significant step for both companies, you should make sure that the merger will be beneficial for your business in the long term.

Evaluate your finances

Because the companies will become one legal entity, your finances will become mingled. Entrepreneur magazine says that you should do a full inventory of your finances. Make sure that it will be easy for the other company to understand your financial situation. Create a clear list of your stock and list each of your stockholders, along with how many shares each one owns.

Additionally, make sure that your bookkeeping is transparent. The other company should understand what kind of resources you have access to and how you are doing financially.

Examine the other company’s finances

It is also important to make sure that the other company is financially sound. Go through their finances as you prepare for the merger. Does the company have legal documents for all of the transactions? Is the tax information up to date? Additionally, makes sure that the company is on good terms with the Internal Revenue Service and that you understand where all of the income originates.

By taking the time to do your due diligence, you can ensure that the merger is beneficial for both companies.