Skip to main content

When taking over a bussniess can you make the person take the debt they aquired in the company name with them

Concord, NC |

my brother had more than 20,000 dollars is outstanding debt to his suppliers...would i have to pay the suppliers then sue to get the money back from my brother

Attorney Answers 3

Posted

Not necessarily. This is really a business law question and I am not a business lawyer. Before you "take over" the business, you should be talking to a business law attorney who can draw up a proper purchase agreement. You should buy the assets of the business. if you want to take over the running of the business then the $20,000 in debt needs to be factoreed into the purchase price somehow and the purchase agreement needs to be very specific about what assetes or liabilities are being sold along with the business.

If your brother has this much in debt, unless you have a written agreement obligating him to apy, you are going to have a hard time getting this money back. I really think the better course of action is to get a business attorney involved now and to negotiate the $20,000 in debt to get the purchase price reduced.

Mark as helpful

Posted

There are two ways to purchase a business. The preferable, unless there is a license, patent orr other item that needs to be maintained (including a franchise, which requires the consent of the franchisor), is to purchase the assets, and start a new business. Leaving the seller (your brother, with the obligation to pay the debts from what you pay for the assets.

As noted by my colleague, since your brother has been unable to pay his company's suppliers, ( I suspect he also owes payroll taxes and sales & use taxes), it will be difficult to collect these monies from him.

The alternative is to purchase the stock or membership units of the company, but with this type of purchase not only come the assets, but the liabilities.

The transfer of assets by your brother, whether by purchase or by gift, to you, can be a fraudulent transfer-a transfer intended to prevent the creditors from being paid. If this is asserted, you and your attorney, as well as you brother can be held liable for the unpaid debts.

Do NOT, as suggested, do this until you speak with an attorney licensed to practice (who handles business matters), in the state where the business is located.

The foregoing is not intended to be legal advice upon which you may rely as I have not been retained for this purpose.

Mark as helpful

1 lawyer agrees

Posted

Depending on your the agreement you strike with your brother and whether the debts are only in the company name or his individually, will help you determine the course of action you need to take as well as whether you can negotiate the taking over of the company without the debt. Speak with a competent attorney in your area before doing this. I do like the suggestion of negotiating the debt down if possible especially if you are going to have to deal with it if you purchase the liabilities along with the company.

Mark as helpful

Employment topics

Top tips from attorneys

What others are asking

Can't find what you're looking for?

Post a free question on our public forum.

Ask a Question

- or -

Search for lawyers by reviews and ratings.

Find a Lawyer

Browse all legal topics