Legal Question in Business Law in California

Buying Assets with Debt

I would like to purchase an existing business that has a strong good will and customer base but i do not want to take over all of the debt. Is there a way of just acquiring the assets and assuming some of the debt?


Asked on 5/20/04, 3:59 am

4 Answers from Attorneys

Larry Rothman Larry Rothman & Associates

Re: Buying Assets with Debt

You can buy the assets. There should be an escrow and bulk sale notice. Please contact me if you have any other questions. There should also be tax releases.

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Answered on 5/28/04, 2:15 am
Michael Olden Law Offices of Michael A. Olden

Re: Buying Assets with Debt

And 30 years of practicing law in the business area I've handled numerous sales of businesses. When you have more debt than assets it becomes very tricky. Who knows from your question how much debt areas compared to the value of the business. Basically, every business very possibly comes within the bulk transfer law which requires notice to all creditors and an escrow to be established where the creditors claims are to be dealt with. If you do not do this then it becomes a transfer in fraud of creditors in you may very possibly take on not just the creditor claims by other damages due to the creditors for failure to comply with the law. You cannot do this yourself. You are not expertise, schooled or in any way knowledgeable. If you were you wouldn't be on this site. Therefore, you must go out and get an attorney who is a licensed to practice a lot and expertise in the business/sales of business area. Understand all of the basics and allow him/her to aid you in preparing the written agreement applicable to the purchase of the business which is absolutely necessary. My God, you might not have thought that was true. To stuff which helps you and not the other guy. Don't be naive.I have been practicing law in this legal area for over 30 years and understand your problem well. I practice in the S.F. Bay Area and if you wish to contact me call at 925-945-6000.

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Answered on 5/21/04, 10:02 am
MAURICE MEHRBAN, MD, ESQ. MEHRBAN AND ASSOCIATES

Re: Buying Assets with Debt

THANK YOU FOR CONTACTING LAW OFFICES OF MEHRBAN AND ASSOCIATES. losangelesfirm.com.

A contract is an instrument reflecting agreement of business parties. You must negotiate with seller and find out if he/she agrees with what you need. If seller agrees, you may reflect the agreement in the contract to be binding. Please contact us at: (310)804-5225, or other lawyers for precise legal advise.

Please get legal advise with all information

Thank you, and good luck with new business

losangelesfirm.com

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Answered on 5/21/04, 12:19 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Buying Assets with Debt

Yes, this can be done, but there are some pitfalls that strongly suggest use of a business lawyer to structure the deal as well as just draft or review the documents.

For example, the Commercial Code contains a bulk transfer law placing strict requirements on both buyer and seller in a deal where a substantial part of the assets of a business change hands. These requirements are for the protection of creditors.

Buyers and sellers should also be aware of laws against fraudulent transfers. Any deal that has either the purpose or even the effect to "hinder, delay or defraud" creditors or prospective creditors can be set aside after the fact.

Another consideration is that the buy-sell agreement should have properly-drafted provisions for warranties, representations, indemnities, assignments and assumptions, security agreements, and all that other legal stuff that makes the difference between a deal that won't stand up to the test of dispute and challenges versus one that protects the parties.

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Answered on 5/20/04, 11:24 am


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