is it illegal for a seller of a small business to falsify the gross income and expenses?

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is it illegal for a seller of a small business to falsify the gross income and expenses?

I am thinking of buying a small business. I am concerned that the owner is inflating the income and under reporting the expenses. Is this illegal? The property is listed with a real estate agent and I believe they also know of the falsified documents. Is the agent breaking the law or just unethical?

Asked on June 2, 2009 under Business Law, Illinois

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Do you really even have to ask if this is legal?

If you feel sure that the documents relating to the sale of this business are being falsified don't walk - run - from this transaction.  Who knows what other surprises await you?  As for the broker, obviously you never want to do business with them again.  If you have some proof of all of this you may want to lodge a complaint against him/her with the appropriate licensing board.

However, I wouldn't do anything before consulting with an attorney.  Voice all of these concerns to him/her and see what they advise.  You want to make sure that if you do make any public accusations against anyone, that they are well founded; otherwise you could find yourself on the wrong side of a lawsuit.


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