Wondering what steps you should take to investigate a new business partner? Learn how to protect your business by conducting thorough background checks, checking references, and verifying credentials.
What Steps Should You Take to Investigate a New Business Partner?
The investigator should pay the special attention on the following points
- REASON
The investigator should pay the special attention to know the reason that why a new partner want to be admitted There may be a number of reasons of admitting a partner but valid reason is the proof that a partner is needed to partnership.
- FINANCIAL POSITION
The investigator should pay the special attention to know the financial position of proprietor or partners who wish to admit his client as partner.
- DECEASED OR RETIRED PARTNER
If new partner is admitted in place of deceased or retiring partner, then investigator should pay the special attention to know that his client possess the skill and experience of the old partner, if not then he may suffer in loss.
- GOODWILL
The investigator should see that the amount of goodwill which is to be paid by his client is reasonable or not.
- CAPITAL
The investigator should pay the special attention to know that whether the capital to be provided by his client will be used for working capital of for paying off any liability
- SALARY
While determining the future profit of the business, the investigator should pay the special attention on salary which the retiring partner was getting.
- SHARE OF PROFIT
The investigator should pay the special attention to know whether the proposed share of profits to be paid to his client is reasonable or not.
- PARTNERSHIP DEED
The Investigator should pay the special attention on the old or proposed partnership deeds to know that they have no adverse affects on the interest of his client.
- INCOM PLETE CONTRACTS
The investigator should pay the special attention to know whether incomplete contracts which will be transferred to the reconstituted firm will be a liability or loss.
- FINANCIAL CRISES
The investigator should report to his client if he finds that any partner of the business is facing the financial crises.
11 PROFITABILITY RATIOS
The investigator should compute the Gross Profit Ratio, Net Profit Ratio, Operating Ratio and other expenses ratio to sales. A new partner can not take risk of joining a business which is already running in loss
- FUTURE PROSPECTS
The investigator should pay the special attention to know the future prospects of business He can also check the demand of product.
- FINANCIAL STABILITY
The investigator should pay the special attention to know whether the business is financially stable.or not. Financial position may be check with the help of current and quick ratio The current assets must be double than current liabilities
- CONTINGENT LIABILITIES
The investigator should also pay the special attention to check the contingent liabilities. The bill receivable discounted may or may not become the actual liability. It must be disclosed in report
- REDRAFT ST ATEMENT
The investigation should also redraft the statements. This led rail statement may give present true position of the business.