More details to this question:
Me and a partner are curious in purchasing a business. When purchasing a business do you also take on the responsibility of any debt or taxes owed? If so, is there a way to make a contract that would state that any taxes or debts owed are in full responsibility of the previous owner?
1 ANSWER
Whether you are responsible for any existing liabilities is completely a matter of negotiation between you and the sellers. However, if you do not want to be responsible, you can't buy the entity. In other words, if xyz corporation has debts that you don't want the new business to be responsible for, you (or your entity) can't buy the shares of xyz corporation. If there are obligations still outstanding after closing on the sale, it is not enought to simply agree that the sellers will pay those obligations (unless you get security for those promises) because if the sellers breach that agreement, xyz corporation, which you now own, would still be liable to the crediror.Rather you (or your entity) have to buy the assets of xyz corporation. And you have to make sure that there are no liens or other security interests against those assets. If there are, the assets could be seized to pay those debts if the sellers don't pay them.
Answered on Mar 10th, 2014 at 12:48 PM