If I’m contemplating buying an existing construction business but dissolve the current corporation and start a new one, do the “sins” of the other first follow?

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If I’m contemplating buying an existing construction business but dissolve the current corporation and start a new one, do the “sins” of the other first follow?

I understand that I can be held liable for poor performance from the past.

Asked on July 14, 2014 under Business Law, New Jersey

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 7 years ago | Contributor

Legally, if corporation A and corporation B are separate--even if owned by the same person(s)--then the "sins" or liability of A will not follow B. There are a few exceptions to this, such as if B takes over so completely or directly for A that it is clearly a successor company and/or that you did this to defraud creditors or otherwise escape liability, but this generally applies IF the ownership remains the same--the owners are doing this as a dodge or tactic--whereas you say that you are buying a company, so ownership will be different.

Of course, the bad reputation of A may follow B if it becomes known that B in one way or another used to be A; but you can't do anything about that other than try to build up a good reputation.


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