Buying A Business In Canada – Beware Of Business FRAUD
You’ve found a business opportunity you are interested in learning more about. You’re meeting the owner, perhaps even the so called business representative, and you’re told x amount of undocumented cash, is being taken from the business each month – what do you do?
If you’re looking to buy a business that deals in cash, we need to have a very serious conversation about unreported cash. Undocumented cash the owner says they take from the business, each month.
So there you are in front of the business owner who tells you (quite proudly) that they take unreported cash from the business in the amount of hundreds, even thousands of dollars a month. Surprised, you press for more information and you are told “… it’s no big deal – everyone in the industry does it”. Furthermore, they tell you the large amount of unreported cash they take from the business, is the reason why the business is listed for such a high asking price!…
Ok people let’s stop right there! We have a few issues to discuss:
Taking undocumented cash from the business is illegal!
It’s called tax evasion and if you don’t believe me why not call the Canada Revenue Agency (CRA) for yourself to verify this. For your convenience – here is their phone number: 1-800-959-5526 & press the * button to speak to an agent. Give them a call, I’ve always found them super helpful and friendly.
You might even want to suggest to the business owner and to the so called business representative that they join you on a conference call with the CRA. That being said, you might not want to do this in person for your own personal safety!
“… it’s no big deal – everyone in the industry does it”
BS! I’ve met hundreds of honest business owners who are diligent at tracking every single dollar that they receive. Many more honest people than the few who admit to screwing the CRA – and themselves for that matter.
The unreported cash taken from the business, is the reason why the business is listed for such a high asking price!
When you valuate a business, you NEVER, NEVER, include undisclosed / unreported cash being taken from the business in your business valuation calculations. NEVER! NEVER EVER!
I really don’t care how business owners choose to run their business. What I really care about is YOU and I don’t want you to fall victim to this kind of shyster who is trying to convince you that fraud is the key to making money. Furthermore, I don’t want you to listen to those so called scumbag business representatives who are supporting this type of shyster seller. Quite frankly this type of person should be exposed so every buyer out there, knows who they are!
Thinking about the unverifiable benefits of buying a business that is involved in fraud? Forget that thought – its a stupid thought. You’ll be buying yourself lots of trouble.
Specifically, depending upon how you purchased the business, you could be financially responsible for the outcome of any CRA audit! Even if for the period in question you did not own the business!
“…O but Matthew” you say, “my Sale Purchase Agreement says the seller will be responsible for any CRA issues that relate to when they owned the business”.
That may be so, but don’t for one moment think the CRA give a damn about your little agreement. They are going to come after you personally – you are now the representative of the business – you are the tax payer. So once CRA have chewed you up, spat you out and you’ve paid your dues to the CRA, it will be up to you to track down the previous owner (if you can find them) and go after them for all your damages.
Good Luck with that!
Let’s Review And Summarize The Discussion.
Don’t for one minute think that someone screwing the CRA will not hesitate to screw you!
Taking undocumented cash from a business:
- Is illegal!
- There’s no way to verify it.
- There’s also no way to finance it (so you’ll instantly burn up large amounts of your hard earned money).
- There’s no way to sue for it (once you take ownership of the business and realize the “cash” does not exist)
I’ll tell you what you should do when a shyster business owner and or their scumbag business representative tells you that you need to consider the unreported cash being taken from the business – you waive a big red flag and run!
The reality is there are many more “honest” businesses you can buy out there – don’t get involved in a business involved in fraud that is being sold or represented by shysters!
Thank you for taking the time to read this article: Business Fraud – How To Quickly Identify It. It’s just one type of business fraud / corporate fraud that I hope you will keep an eye out for when looking to buy a business.
If you enjoyed reading this article and found it helpful and informative, please do take a moment to Comment & Share! Doing so really will help me get my message out to other people just like you, who are searching for such expert advice.