When a business is purchased, the responsibility for any outstanding litigation or legal troubles also transfers hands. At this stage it is vital to have a lawyer look into the current legal standing of the company.
Some important questions to ask are:
Have any claims or lawsuits been filed against the business?
Is the company presently dealing with any outstanding litigation?
Has the company ever gone to court before?
If so, did they win or lose?
What is the reputation of this business within the legal community?
These are all questions that need to be answered before proceeding with a purchase. Oftentimes, a lawyer can help you answer these questions, and can draw up a contract for purchasing the company that includes a clause dealing with liability, indicating that any and all outstanding liability should be placed on the previous owner. Without this kind of clause, the responsibility for any legal problems with this business under its current owner will transfer to you at the time of purchase.
While outstanding litigation does not automatically mean that the business should be immediately rejected from consideration, it does mean that it will need to be looked at more closely, which will cost both time and money.
