Legal Question in Business Law in California

Personally liable to whom?

Having a DBA does not necessary relate to avoiding personal liability for a particular business. DBA merely indicates that the business is operating under a particular name and without the creation of some sort of limited liability entity like (LLC, Corporation etc.), you could be purchasing or conducting the business as a sole proprietor or as a partnership depending on the situation.

If you are running this business as a sole proprietor or as a partnership then the short answer would be -- yes you could be personally liable for the any debt and liability that may come along with the purchase. In order for a subsequently created entity to assume the liability a novation agreement would have to be entered into.

My advice would be to consult with an attorney on the details of your situation before moving forward.

Jim Betinol

Partner

Withrow and Betinol Law

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Well, I would assume that you have not yet developed or signed the actual Purchase Agreement. When you sign that document, be sure to sign, not as an individual, but as an officer of the corporation and be sure that the document expressly states that only the corporation will be liable. I would also assume that you will have a competent business development attorney review the purchase agreement before you sign it...yes?

By Grace...

Shawn Jackson ESQ. (707) 584-4529

Business Development Attorney

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Yes, you will be liable if you make an offer using a "DBA" and the offer is then accepted.

Furthermore, unless you are very clear with the seller of the business as to who you are, and who stands behind the offer, you run the risk of not being taken very seriously. A business seller with any experience is going to check small details of an offer before accepting it, such as who is the buyer, is it duly incorporated, is the fictitious business name registered, where is the buyer getting its money, who will personally guarantee any non-cash part of the selling price, how professional-looking is the offer, and on and on.

Finally, using a made-up name to make an offer could be taken by some as a deceit or fraud. Business people need to know with whom they are negotiating.

As a Franchise Attorney I need to inform and add a little business reality. If you sign the purchase agreement before you form a corporation, you are personally liable, unless the seller agrees otherwise, which won't happen. Sellers won't let purchase agreement obligations flow to a newly formed corporate entity. They want you on the hook individually and may also require some collateral. Consult with a good business or franchise attorney in your area for specific advice.

Mr. Franchise - Kevin B. Murphy, B.S., M.B.A., J.D.

Franchise Foundations, a Professional Corporation