How to Avoid Unwanted Liabilities When Buying a Business

Buying a business from someone else can mean taking on both their assets and liabilities. What wording should you look out for if you are the buyer in an asset purchase agreement? A carefully worded asset purchase agreement is necessary to ensure liabilities are left behind and fewer obligations are passed on to you. A business law attorney is best qualified to look over the transaction to ensure that the purchase and owner are protected.

Sometimes when you buy a business, there may be loans or liens that have to be paid off, or they may be assumed. Do the due diligence and research the matter before executing an asset purchase agreement and certainly before the closing occurs. Nonetheless, certain language in the asset purchase agreement will help avoid unwanted liabilities of the seller. In short, there should be hold harmless and indemnification language in the asset purchase agreement protecting the buyer if such liabilities arise. These liabilities could arise in a number of situations such as employment matters, debts owed for equipment, taxes, employment taxes, outstanding fire inspection problems and fines etc., and arise before the closing, but may not be asserted until much later after the closing.

Given the possibility for unwanted liabilities to be asserted after the business is purchased, your best move is to contact a business law attorney before taking any steps to buy a business.