A successor corporation is a new business that arises out of a prior existing one. It is important to keep in mind that taking over another business can leave the new business open to liabilities. It may be in your best interests to work with a business lawyer if you wish to create a successor corporation.
How Successor Corporations Occur
In the majority of cases a successor corporation is created through an acquisition or merger. By taking over the existing corporation a new business entity is created. Your company may purchase another business, and in the process create a new name and identity. The terms of the agreement will mean that the property, financial assets, obligations and equipment become the property of the new company. Ideas, knowledge and contacts that were held by the former corporation also become the property of the new one.
Be Careful When You Acquire a Business
You need to be clear on the fact that by taking over an existing business you accept its assets, but also its liabilities. It is often the case that a company will try to escape liabilities such as tax obligations through a merger with another company. If you are not aware of the company’s liabilities prior to the acquisition you may be left with being obligated to repay these liabilities. You might have recourse through a lawsuit, but the court may decide that by accepting the merger you should have been aware of any liabilities, and therefore they are yours to repay.
When a business that is seeking to acquire another does become aware of existing liabilities, this can often disrupt negotiations. You should be aware also that if an individual or entity was seeking to sue the former corporation, your company may become the subject of the lawsuit and be liable for paying damages.
If You Are Seeking to Create a Successor Corporation
Acquiring a business can lead to unexpected liabilities if you are not careful. It is important that you hire a business lawyer who can help you unveil any information about the business that is the object of your acquisition. Call Seck & Associates today to arrange a consultation at (913) 815-8481.