Panama’s economy is booming, and lots of foreigners are coming to Panama to either start a new business or purchase an existing business. Here is a list of important questions to ask before buying an existing Panama business:
1. What is the Panama Business Really Worth? Just like buying a car or a house one wants to purchase at fair market value or less. Business valuation experts are available in Panama. A smart Panama business seller will have already done this before listing the business for sale. The value of a Panama business can be affected by many things such as revenue, client/customer roster, location, competition, inventory, debt, employee wages, gross sales, and past net profits.
2. Inspect the Books. Sellers often exaggerate the volume of sales and high profits. The real proof lies in the company’s accounting records. A competent accountant needs to inspect the books, verifying that the company did not engage in questionable accounting practices and to confirm the actual sales volume and profits.
3. What is Included? The Panama business owner should be able to provide a list of assets including the building or office (if owned), equipment, furniture, and extras such as trademarks, copyrights, and patents.
4. Is the Rent Appealing? Leased premises require asking for a copy of the rental contract which will tell you how much time remains and when the rent can be increased, or if there are limitations to a sale of the Panama business.
5. Why is the Owner Selling? Is the seller hiding facts which could hurt the Panama business in the future? This could be a larger competitor relocating nearby with lower prices, or zoning changes restricting future growth plans.
6. Any Bad Debts? Inquire about all of the debts to see if any bad loans exist or back taxes are owed. Leasing companies may not have been paid and are ready to repossess the furniture and equipment. Utility bills and internet services may not have been paid.
7. Is the Seller Really the Owner? Find out if the Panama business is owned by an individual, family, partnership, or a corporation. Ownership by a corporation needs to be investigated by researching records at the government’s Public Registry which has the Articles of Incorporation on file along with the names of the Board of Directors and its Officers. You can also perform a Panama corporation search. Go to Google and search every name listed on the corporation registry to see if there is any negative information about the person on the internet. The same goes for ownership by individuals or a partnership, Google all of them. If the Panama corporation is merely selling its shares and will remain on record as the owner of the Panama business, investigate to see if there are any pending lawsuits, unpaid government fees or fines, and if the corporation is under investigation by the government.
8. Does the Purchase Contract contain a Non-Competition Clause? Do not allow the seller to become a competitor.
9. Can Foreigners Own this type of Business? Certain kinds of Panama businesses cannot be owned by foreigners. Retail businesses are reserved only for Panamanians. Some professions cannot be performed by foreigners including medical and veterinary doctors, architects, engineers, and attorneys. Only Panamanians and foreign legal residents for at least five years can become real estate agents (called a “broker” in some countries).
10. Do You Sign the Purchase Agreement? Nearly every Panama business purchase contract will be written in Spanish. Do not sign it until you have a competent Panama business attorney read it and advise you. All signatures must be verified by a Panama Notary Public.
Prior to buying an existing Panama business, hire a competent Panama business lawyer.