When selling businesses, many owners make the assumption that, once they have made the sale, the debt will disappear. They, therefore, approach the sale process from a point of ignorance and when things do not work out as they imagined, they end up taking drastic measures such as cancelling the transaction or trying to change the terms of the transaction. Whether you are buying or selling a business, it is important to consider getting legal help to assess the financial situation of the business in question and advise you accordingly. Some of the debt related issues that a competent commercial lawyer can resolve include:

Stock sale and inherited debt

One of the ways in which you can own a business is through a stock sale. This happens when all the stocks of an entity are purchased by a buyer. By purchasing the stock, the buyer will be assuming ownership of everything that the company owns, including the assets and liabilities. However, a stock sale does not happen in just about any calibre of business, as a matter of fact, only really big businesses with assets running into tens of millions of Australian Dollars qualify for stock sales. In this case, the buyer assimilates the debt.

Asset sales and inherited debt

An asset sale is a little different from the stock sale. In an asset sale, there is the transfer of a specific number of assets and liabilities from the seller of the business to the buyer. An attorney with experience in commercial law will be crucial in such a sale because they will inspect the documents on the transfer and make sure that the buyer and the seller are on the same page on debt transfer to avoid legal issues.

Sales which include exempted business assets

Legally, there are some assets which are normally excluded from the sale process. First of all, if there is any equipment that was leased by the original owner of the business, the responsibility to continue with the lease payments falls on the new owner of the business. Another case that brings serious issues is successor liability on bills such as utility bills, sale taxes, property taxes and income and social security taxes.

Buying or selling a business is not a simple process. It is important for both parties to do extensive research on the party they are engaging with. It is also important to have a lawyer find out everything there is to know about the business being bought to avoid unexpected costs.