Legal Question in Technology Law in California

Re: Reseller

The fact pattern is a little sketchy.

I believe the following is true:

if you purchased the business in an asset deal, ie. acquisition of the servers, rolodex etc. then you are off the hook.

If you purchased the business as a stock deal, ie you acquired all the stock of the company, then the corporation is liable for all obligations whether incurred during your ownership or not.

However, you might have a claim against the previous owner for failure to disclose in his due diligence documents the existence of a debt.

[the latter option requires substantial review of deal and disclosure documents]

Re: Reseller

You don't say whether the business you bought was a corporation, LLC, sole proprietorship or something else. If you buy a corporation or LLC, you acquire both its assets and its liabilities. If you buy only selected assets, the liabilities generally don't follow unless the transactions was for an inadequate consideration, in which case the deal may be considered a fraud on the creditors, and they can recover from either the buyer or the seller. There is also a possibility that a sale of most or all the assets can be held a de facto merger, in which case the liabilities come along to the acquirer. You should also consider the Bulk Sales Act, Commercial Code sections 6101 et seq., but it doesn't sound as though it applies to this kind of business.

Re: Reseller

The answers should genearlly be in the purchase/sale document(s) your lawyer drafted and/or reviewed and/or revised.