When a business owner sells his or her business, some of the debts that come with it are often transferred to the new owner. Buyers conduct due diligence prior to acquiring a business due to the possibility that some of these liabilities will be unanticipated and extremely costly.
The buyer will evaluate the target company’s risk factors during due diligence, particularly those pertaining to environmental, product, and employee liability issues. Before selling his company, a business owner should be aware of these liabilities because they can significantly affect the outcome.
Business purchasing is structured as an asset sale or a stock sale and may be affected if a buyer discovers potential liabilities during due diligence. The transfer of liabilities in a merger and acquisition transaction is influenced by deal structure. Some business owners may also face significant tax consequences as a result. The legal entity of the seller is acquired by the buyer in a stock sale. Consequently, unless otherwise agreed upon, the target company’s liabilities are transferred to the buyer.
Through representations and warranties, buyers expect sellers to guarantee that all liabilities, contracts, and employment agreements have been disclosed, as well as all current taxes, wages, and insurance policies. However, liabilities resulting from unanticipated or overlooked issues occasionally surprise buyers and sellers.
Be a strategic buyer.
Century Mergers & Acquisitions, your trusted business brokers in Roswell, Georgia, can help you sell or buy a business without hassle.
We also help with real estate in Georgia.
Leave a Reply