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?

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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.
Moises

Asked on November 21, 2017 under Business Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 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)?


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