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How do I purchase a business with my for my E2 visa?

How do I know the business is making the money the owner says?

What is the process of buying a business for an E2 visa?

How much of a deposit am I required to pur down to purchas the business?

How do i prevent myself from being robbed, scammed, taken advantage of when buying a business for an E2 visa

What is Due Diligence when buying a business for an E2 Visa?

Due Diligence is the process of investigating the business you are interested in purchasing.

When conducting your business search I recommend using different levels of due diligence as you are narrowing your search. Use progressively deeper levels of due diligence as you find yourself getting closer to a finding the business that you are interested in buying.

For example you start looking at the advertisements of the businesses for sale.  You make a list of the type of business that matches your interests, your lifestyle, your financial needs, the area you want to live in and the number of the owners work hours per week and also is E2 compliant.

The process of investigating a business is expensive and time consuming so you don’t want to waste time on businesses that don’t meet your criteria. Create a separate questionnaire sheet for each seller see example bellow:

Name ________________________

Address __________________________

Telephone number ____________________

Email ________________________________________

Type of business ________________________________

Location of business _______________________________

Price of Business __________________________________

Annual Sales ______________________________________

Annual Business Income ___________________________________

Owners W-2 Salary income _________________________________

Number of W-2 Employees _________________________________

Amount Each Employee gets paid?

What are the roles of each employee?

How many hours does each employee work?

Are any of the employees relatives?

Are any employees owners?

How many hours per week does the owner work? _____________

Does the owner have another job outside of the business?__________

Do a google search on the owner

Employee 1 ____________________________

Employee 2 ____________________________

Employee 3 _____________________________

Employee 4 _______________________________

Assets included in the Sale ___________________________

If the business is renting a storefront, office, warehouse or other assets

Do you have a lease? ____________________

What is the rent stated in the lease? ________________ What are the annual increases?

How many years are remaining on the lease? _____________

Is there a renewal clause? ________________ If so for how many years are on the lease renewal? _____________

Does the renewal clause state the monthly rent and the annual increases? __________

If yes what I the new rent and annual increase? ________________________________

Are you paying the full amount in the lease or has the landlord agreed to accept a different amount? _____________________________

Do a google search on the owner: verify employment, home address, observations ________________________________

Google Search on business (Print out customer reviews and make a file) type the business name and type the word scam net to it):

Run a dun and Bradstreet Report on the Business    

If possible and you have the sellers permission ask if you can run a credit report on the owner.

(Even if the owner refuses to allow you too run his credit report it tells gives you information about his situation which can be used to see if he is telling the truth about his income.  Also you ability to guess the owners financial situation will might give you negotiating power later in the purchase negotiations.     

Do you have tax returns that are going to match the sales, income and payroll that you stated in your sales ad?  __________________________

If the business is open to the public such as a restaurant, gasoline station or car wash and the owner gave you acceptable answers to the above questions I would go and spend time sitting in the establishment or outside if the owners does not permit you to sit inside.  I would use the following type of questionnaire:

Name ________________________

Address __________________________

Telephone number ____________________

Email ________________________________________

Type of business ________________________________

Date of observation  _____________________________

Opening time ______________ Actual time employees opened business _______

Hour 1 Clients ______________________________________ 

Put a mark on the sheet or give each customer a number and mark the amount they spent and the products they purchased.

Hour 2 Clients ______________________________________

Hour 3 Clients _______________________________________

This information can be used to cross check claims the owner makes and to verify the reasonableness of the sales claims reasonableness. Also the observer may notice problems in the business that can be corrected with new management such as over or understaffing.

The customary practice in business that have a sales price for less than 1 million is that the owner or broker gives the client verbal or written representations of the business sales and expenses but does not  allow any type of invasive investigation until the buyer puts an amount in escrow account and signs a purchase agreement. The deposit amount is negotiable, but the usual for smaller businesses is 10% of sales price deposited into an escrow account.

A purchase agreement, also called a sales contract or a purchase contract, states the terms of the transaction for purchasing specific business. It lists the deposit, purchase price and the date the buyer must purchase the business. Also it lists due diligence items that must be met, and the conditions under which the buyer may break the contract and have his deposit returned. 

Most contracts in the small business market make it relatively easy for the buyer to receive his deposit, however the terms of the contract state specifically the terms so a seller can require that the buyer forfeit his deposit if he does not purchase the business, if it passes the due diligence procedures specified in the purchase agreement.

Written by

Thomas McGovern, MBA, CVA

929 290-8609

Qualifications of the Author

Certified Business Analyst, Business Appraiser, Business Valuator certified by the NACVA, National Assoiation of Certified Valuators and Analysts

President of Advantage Brokerage, Inc. for over 17 years

Business Broker as a Sellers Representative

Business Broker as a Buyers Representative

Representative for E2 Buyers

Due Diligence Evaluator for E2 Buyers