If I’m purchasing business, am I liable in anyway for the previous owner?

UPDATED: Sep 29, 2022

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

UPDATED: Sep 29, 2022Fact Checked

Get Legal Help Today

Compare Quotes From Top Companies and Save

secured lock Secured with SHA-256 Encryption

If I’m purchasing business, am I liable in anyway for the previous owner?

I’m buying just the assets of the business equipment and will be changing the name to better reflect myself. Is there anything special I should have written up and signed?

Asked on September 3, 2015 under Business Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 7 years ago | Contributor

If you're only buying the assets, then you should only be liable in relation to those assets themselves--that is, if someone else has a valid legal claim to those assets, such as if they were purchased with financing, and the lender/financing company has a lien on them. While legally, you should not be liable for other claims e.g. breach of contract tort if somene was injured by the company or on its property, that may not, however, stop someone who thinks you are liable from naming you in a lawsuit and forcing you to defend. Therefore, you should include the following in a contract
1 A written representation by the seller that to the best of his knowledge, there are no liens, no claims, and no pending litigation against the business or the assets...then, if it turns out he lied about that, you could sue him for breach of contract.
2 An indeminification clause, stating that if there are any lawsuits or liens asserted against you or any asset you purchased, arising out of conduct or actions occuring before you purchased the assets, that the seller will indemnify you for the cost of defending yourself e.g. legal fees and/or for any judgments against you. 
Any lawyer with experience in drafting contracts can draft the purchase agreement for you and add these terms.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

Get Legal Help Today

Find the right lawyer for your legal issue.

secured lock Secured with SHA-256 Encryption