Legal liabilities to look for when buying a business

On Behalf of | Dec 15, 2022 | Business & Commercial Law

If working for someone else has lost its appeal for you, you might be thinking about buying an existing business. According to Paychex, this can be a better option than starting a new venture, as you already have a good idea about whether or not the business model is likely to work.

Before buying or investing in any commercial enterprise, you must perform some due diligence. When done correctly, due diligence is an exhaustive process with many components. A key part of your due diligence, though, is looking for potential legal liabilities.

What are legal liabilities?

Legal liabilities are anything that could land you or your new venture in legal hot water. Criminal and civil lawsuits, liens and government enforcement actions fall into the category. While it might be possible to flush out your legal exposure on your own, it is typically advisable to work with an experienced attorney during the legal-liability phase of your due diligence.

Where can you run into problems?

As the owner of a business venture, you have several potential problems to consider. Not only must you look at possible legal action against the venture itself, but you also must evaluate the legal exposure of any executives you intend to employ. You also should consider any encumbrances to the property, equipment and inventory.

How can you be successful?

When you are buying a business, you want to have as few legal surprises as possible. Even though you might not be able to mitigate all potential risks, being successful requires knowing about them. Ultimately, by taking a comprehensive approach to identifying legal liabilities, you are sure to boost your chances of making a smart purchase.