Hello, what are some questions I should ask when inquiring about a small business fitness center that is already up and running that is for sale?

UPDATED: Oct 1, 2022

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Hello, what are some questions I should ask when inquiring about a small business fitness center that is already up and running that is for sale?

There is a fitness center up for sale and I am interested in purchasing this gym.
The price comes with the equipment. What are some of the questions I should be
asking when inquiring about this gym? This would be the first step, I just want
to make sure I’m heading in the right direction. Thanks.

Asked on November 21, 2017 under Business Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

In no particular order:
1) You want to see audited financials, to see what the revenue is, the costs are, the profit, etc.
2) You want to know whether the equipment is owned or leased, and see proof of same, so you know what, if anything you are buying--and if "owned," was the equipment financed, and, if so, does the seller or financing company have any liens on, security interest in (e.g. right to repossess) the equipment.
3) Do the clients have contracts? If so, for how long? 
4) How much time has been prepaid by the clients--e.g. if they just paid for one-year contracts up front, you might have to let them use the fitness center for months without getting any new revenue in.
5) Same question as above about gift certificates: how many are still outstanding, that you would have to honor?
6) Is the property owned or leased? If leased (most likely), what are the terms of the lease and how much time remains on it?
7) Any employment contracts with employees that you might have to honor?
8) Any loans or lines of credit which the business would have to pay off?
9) All taxes to date fully paid, or is there some potential tax liability?
10) Any trademarks (like the name) or other intellectual property?
11) Current accounts payable (money coming in or owed to business) and paymable (money going out or owed by business)?

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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