Business Valuation

Asked over 1 year ago - Los Angeles, CA

Is it illegal if by legal means you disclose everything about your business and yet because of excitement and emotion someone purchases your business for 15 times what it is worth.

If in the future this someone (the buyer of the business) has buyers remorse and sues you will it be a lawsuit that is handled in Federal court, a State court, or a local court of some type?

Please note that if someone is willing a lot more for a business I am not going to attempt to sway them away from it.

Attorney answers (3)

  1. Justin C. Lowenthal

    Contributor Level 14

    12

    Lawyers agree

    Answered . There is no such thing as a rescission right for buyer's remorse after the purchase of a business, unless such a term is specified in the purchase agreement - which would be unusual. Nothing will prevent a buyer from later suing you, but it is unlikely they will have a valid or meritorious claim, unless, of course, you failed to disclose material information. Any lawsuit brought against you would likely be in the Superior Court of California, in the county where the purchase agreement was entered. However, if the buyer is from out of state and the amount in controversy exceeds $75k, they may bring their claim in federal court.

    This response is not intended, nor should it be construed as legal advice. Any information provided is for... more
  2. Robin Mashal

    Contributor Level 19

    11

    Lawyers agree

    Answered . Disclaimer: The materials provided below are informational and should not be relied upon as legal advice.

    I am not clear based on your description, what business you sold, and how it was sold. A proper sale of business would somewhat resemble a real estate transaction. That is, the parties will enter a written agreement including representations and warranties by the seller, the parties open escrow, the purchaser conducts her/his due diligence reviews, and the transaction is consummated at the close of escrow. In this type of scenario, there is little room for "excitement and emotion" and the purchase price typically reflects the value of the business. I suggest you review your transaction documents with your own attorney to protect your legal rights.

  3. Andrew Kevin Jacobson

    Pro

    Contributor Level 16

    10

    Lawyers agree

    Answered . Probably the only way a contract for the sale of a business could be rescinded is if there is some type of fraudulent representation or concealment of material facts. How a buyer evaluates how much a business would make in the future is an opinion, and it might be wrong -- or right. A client of mine "overpaid" $15,000 for some intellectual property from a kind of bankruptcy sale, and it came to be worth millions.
    Work with the buyer on the due diligence -- and if the buyer doesn't perform the due diligence, make sure that the contract shows the opportunity was given. If the buyer ridiculously overpaid, the buyer may want to sue, but you want to be prepared. A good lawyer will help you document that now, which will save you a ton of money later. Avvo has quite a few good lawyers in the LA area who can help you. An ounce of prevention now can save a hundred pounds of cure later.
    The law can punish immoral actions, but it does not stand in the way of stupid actions.

    www.bayoaklaw.com. 510-208-5500. This answer does not create an attorney-client relationship. It is not legal... more

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