When someone purchases an existing business in Florida, state law expects that the prospective buyer has conducted proper due diligence. If the buyer inadvertently decides to buy a company without in-depth research or lacks the basic skills to conduct the research, it will likely result in future liability.
In this article, you will find out the most common types of liability after buying a business in Florida.
Liability After Buying a Business in Florida – Most Common Issues
One of the primary steps before buying a company in Florida is to verify the existence of lawsuits against the business or its current owners. Well-done research can help prospective buyers discover scandals, poor reputations, or even recurrent regulatory violations.
Please note that not an existing lawsuit is not equivalent to a red flag, depending on the factors on which the legal action is based. In such cases, you must consult with an attorney to determine how serious the lawsuit is and the potential effects on a new owner.
For example, if a business has been caught in fraudulent behavior associated with goods or services, it immediately results in a “do not purchase” reg flag. If the business has already been purchased, the guidance of an expert attorney becomes an urgent need.
Faulty Sales Agreement
The sales agreement is the core element of business purchases in Florida. No deal should be closed before both parties have thoroughly reviewed the paperwork involved in the transaction and guaranteed everything is actually in place before the closing.
Poorly drafted terms, vague language, or inadvertent errors can result in costly lawsuits that might require years to fix a problem. Please note that reviewing a sales agreement does not mean reading the document multiple times.
Instead, a proper review requires the assistance of an advisor with the required level of legal expertise.
A proper sales agreement must have a specific clause expressly stating that the buyer will not assume any of the debts and liabilities of the current owners of the business. Failing to include this type of language results in uncertainty, as it can be interpreted as if the current owner agreed to assume the existing liabilities.
Liens Affecting the Business
When a business owner fails to meet a certain financial obligation, the injured party may attach a lien to the company. Essentially, a lien is an interest of a third party recorded against one’s assets, including real property, business assets, etc.
If the former owner of a business has sold the company with a pending debt and the buyer did not find it timely, the new owner may be directly responsible for handling the existing liability.
Depending on the type of lien, not fulfilling the pending obligation can result in a forced sale to allow the injured party to get the proceeds to satisfy the amount owed. The earlier a lien is revealed, the better the new owner’s chances to get rid of it.
Do Not Expose Yourself to Unnecessary Risks – Immediately Contact an Expert Florida Business Attorney
No matter how urgent your situation might be, Attorney Romy B. Jurado willingly wants to find a strategic solution for your case. Contact us today by calling (305) 921-0976 or emailing [email protected] for an individual consultation.