Craig's Corner - Wealth Planning Insights

Friday, June 5, 2015

Considering Legal Claims Against A Business That You Are Buying

When You Buy a Business Are You Buying Their Lawsuits Too?

It’s a nightmare scenario, you buy a business and then a year later are hit with an employment discrimination lawsuit from an ex-employee that you never even knew existed. This nightmare is a reality for all too many new business owners. 

Careful, Customized Drafting 

Your business deal is not cookie-cutter, but it is going to be treated as such if you don’t take the time to find a business law expert rather than relying on the family lawyer or other that is inexperienced in this area. Business law is different, and it takes a business lawyer to know exactly what provisions need to be drafted so that you get all that you want, and avoid taking on responsibility for things you don’t want, when the deal is done.  

There are several critical provisions that need to be included in asset purchase agreements to protect you from assuming unwanted liabilities. The assets and liabilities being purchased must be clearly defined, an indemnification provision protecting you from liabilities that you are not assuming needs to be included and adequate warranties and representations must be given by the seller. 

Comprehensive Due Diligence 

The company’s financial statements and tax returns must be thoroughly examined. Beyond that, all contracts in place and recently completed or terminated should be scrutinized. The company’s insurance coverage must also be looked at. If at all possible, the seller should be required to stay in business in the legal sense and to maintain its liability insurance for a period of time after the sale takes place so that it is the entity on the hook should an unanticipated lawsuit pop up. This is one of the best ways to prevent surprise lawsuits from being filed against you as the new owner. 

Finally, an investigation into the business’s legal liabilities must be undertaken. Any attorney should be able to find out if there are any adverse judgments or pending cases that have not been disclosed. An attorney should go a step further and endeavor to discover if there are any threatened or potential lawsuits out there. 

The experienced business law attorneys at Stone Law have been crafting asset purchase agreements designed to protect buyers from unwanted liability and doing comprehensive due diligence checks since 1993. We serve clients throughout Clark County, Las Vegas, Henderson, Boulder City, North Las Vegas, Summerlin, Carson City, Reno, Washoe County, and Nye County, so call us today at (877)905-0890 to schedule your free consultation. 

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S. Craig Stone II of Stone Law Offices, Ltd. serves clients throughout Clark County, Southern NV, Las Vegas, Henderson, Boulder City, North Las Vegas, Summerlin, Carson City, Reno, Washoe County, and Nye County. Also serving clients with asset protection nationwide.

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