Can I escape bills by opening up a new company doing the same as the old company?

[Ohiogal]

I am being told that "There is nothing wrong with buying only the assets of a company if they are being purchased at fair market value. Its a common business practice."

So doing something that is a common business practice and you say that "if you a modicum of business experienced you might well know of such laws that permit the voiding of transfers of a debtor's assets made in fraud of creditors and It doesn't speak well of your business acumen."

Why would paying fair market value for the assets and leaving behind the liability make me a criminal and an idiot when its a standard business practice?

Seem like half the people here think its a genius move and the other half think its criminal activity.

You are basically taking all the good of the business and changing the name. The debts will outlast that. There are a variety of ways debtors can come after you for such a thing.

 

[Ohiogal]

It really is a common business practice. Now, the title of your thread "Can I escape bills by opening up a new company doing the same as the old company?" does tend to make it look like you are attempting to do something questionable, but I think that was just poor wording on your part. It would be potentially criminal, if you were say the brother of the business owner and he was selling you the assets at pennies on the dollar. However, if its an arm's length transaction, and you purchased the assets at fair market value, then its perfectly legit. Heck, its perfectly legit to purchase the assets at fair market value, even if its NOT an arm's length transaction. Its just that the transaction would be more likely to be questioned in that case.

Those who though it was potential criminal activity interpreted your first post as a transaction that was not arm's length and was pennies on the dollar. I interpreted the opposite.

HE WANTS THE EMPLOYEES. For crying out loud, it is the same business with a different name and he wants to forgo the debt. You need to quit posting.

 

[miogpsrocks]

Perhaps you ought to do as the first responder in this thread posted (he happens to be an attorney.)

Is the person who said " ..., there is nothing wrong with buying only the assets of a company if they are being purchased at fair market value. Its a common business practice." Also an attorney?
If attorneys were in 100% agreement, there probably would be no need for lawsuits because the attorney on the losing side would inform their client they have no case.

The first response seem to indicate it was an idiotic move however half the forum thinks its a smart

How can he say that " This idea doesn't speak well of your business acumen. In fact if you a modicum of business experienced you might well know of such laws that permit the voiding of transfers of a debtor's assets made in fraud of creditors." when a Harvard MBA is doing the exact same thing with his company? Controversial perhaps however smart people use the laws of the country to make money regardless of if they agree with them or not.

 

[miogpsrocks]

You are basically taking all the good of the business and changing the name. The debts will outlast that. There are a variety of ways debtors can come after you for such a thing.

Can you elaborate on what you mean? Like successor liability? Tortious interference?, etc.....?

 

[miogpsrocks]

HE WANTS THE EMPLOYEES. For crying out loud, it is the same business with a different name and he wants to forgo the debt. You need to quit posting.

You are 100% correct on the employees. I do want the employees. The employees have undergone a long and extensive training process which would be extremely difficult to hire people and train them from scratch. The expertise of the former employees and technology is absolutely a must to make this work.

In fact, this is a business I don't relatively little about and may not be capable of training new employees. I need that experience and basic know how to hit the ground running.

My business would be probably be made up of 100% of the former employees(at least in the beginning) with the exception of me. However, it would not be 100% of the employees of the former company. I would only hire about 50% of the old company's employees. Only the most knowledgeable and critical employees, the rest I would let go.

The former employees will transfer in their exact identical position as in the old company. In fact, since I will purchase all the company assets, they will literally move their desk, phone, computer,etc.. from one office to another.

The day would start in the old company and end in the New company without missing a beat. I will also use the computer system, servers, and other technology from the old company. I would literally take their website and change the name to my new company name and maybe a few small cosmetic things.

However on paper, I will file for a new business with a new tax ID, new license # for the various states, new location(few miles away), etc.. So on paper it would appear to be a completely different company with a completely different owner. I don't think I would be hit with successor liability because there is no common ownership.

I would be buying all of its assets (and using the same employees in their prior position and expertise in the business) without any of the liability.

Tell me where I'm wrong?

Thanks.

 

[LdiJ]

You are 100% correct on the employees. I do want the employees. The employees have undergone a long and extensive training process which would be extremely difficult to hire people and train them from scratch. The expertise of the former employees and technology is absolutely a must to make this work.

In fact, this is a business I don't relatively little about and may not be capable of training new employees. I need that experience and basic know how to hit the ground running.

My business would be probably be made up of 100% of the former employees(at least in the beginning) with the exception of me. However, it would not be 100% of the employees of the former company. I would only hire about 50% of the old company's employees. Only the most knowledgeable and critical employees, the rest I would let go.

The former employees will transfer in their exact identical position as in the old company. In fact, since I will purchase all the company assets, they will literally move their desk, phone, computer,etc.. from one office to another.

The day would start in the old company and end in the New company without missing a beat. I will also use the computer system, servers, and other technology from the old company. I would literally take their website and change the name to my new company name and maybe a few small cosmetic things.

However on paper, I will file for a new business with a new tax ID, new license # for the various states, new location(few miles away), etc.. So on paper it would appear to be a completely different company with a completely different owner. I don't think I would be hit with successor liability because there is no common ownership.

I would be buying all of its assets (and using the same employees in their prior position and expertise in the business) without any of the liability.

Tell me where I'm wrong?

Thanks.

As I told you previously there is the possibility that you would be participating in fraud to one extent or another if you were buying the assets of the business for significantly less than fair market value. Otherwise, anyone who tries to tell you that you are doing something wrong is an idiot.

My recommendation is that you simply stop posting here entirely and go get a consult with a local attorney out there in the real world.

 

[quincy]

You are 100% correct on the employees. I do want the employees. The employees have undergone a long and extensive training process which would be extremely difficult to hire people and train them from scratch. The expertise of the former employees and technology is absolutely a must to make this work.

In fact, this is a business I don't relatively little about and may not be capable of training new employees. I need that experience and basic know how to hit the ground running.

My business would be probably be made up of 100% of the former employees(at least in the beginning) with the exception of me. However, it would not be 100% of the employees of the former company. I would only hire about 50% of the old company's employees. Only the most knowledgeable and critical employees, the rest I would let go.

The former employees will transfer in their exact identical position as in the old company. In fact, since I will purchase all the company assets, they will literally move their desk, phone, computer,etc.. from one office to another.

The day would start in the old company and end in the New company without missing a beat. I will also use the computer system, servers, and other technology from the old company. I would literally take their website and change the name to my new company name and maybe a few small cosmetic things.

However on paper, I will file for a new business with a new tax ID, new license # for the various states, new location(few miles away), etc.. So on paper it would appear to be a completely different company with a completely different owner. I don't think I would be hit with successor liability because there is no common ownership.

I would be buying all of its assets (and using the same employees in their prior position and expertise in the business) without any of the liability.

Tell me where I'm wrong?

Thanks.

Starting a new business by purchasing the assets of an insolvent business comes with some risk.

It can be important to remember that the insolvent business is failing to meet its obligations to its creditors for a reason. You should learn what that reason is and consider whether your like-business can succeed where the other business hasn't.

You should not consider the purchase until you have consulted at length with an experienced attorney in your area. A purchase agreement must be drafted with care.

Following is a link to a Utah case that gives a look at some of the potential problems. There is probably a better case to review but the Analysis starting at paragraph 8 is informative.

Decius v. Action Collection, 2004 UT App484: https://law.justia.com/cases/utah/court-of-appeals-published/2004/decius122304.html

 

[LdiJ]

You are 100% correct on the employees. I do want the employees. The employees have undergone a long and extensive training process which would be extremely difficult to hire people and train them from scratch. The expertise of the former employees and technology is absolutely a must to make this work.

In fact, this is a business I don't relatively little about and may not be capable of training new employees. I need that experience and basic know how to hit the ground running.

That is a big risk to take, to take on a business like that, that someone else failed at making work.

My business would be probably be made up of 100% of the former employees(at least in the beginning) with the exception of me. However, it would not be 100% of the employees of the former company. I would only hire about 50% of the old company's employees. Only the most knowledgeable and critical employees, the rest I would let go.

You would not be letting anyone go because you would not be hiring them in the first place. If you go forward with this you have to understand that you are only buying the assets of the business which does not include the employees. You would be hiring those employees that you wish to hire.

The former employees will transfer in their exact identical position as in the old company. In fact, since I will purchase all the company assets, they will literally move their desk, phone, computer,etc.. from one office to another.

Only those that you choose to hire.

The day would start in the old company and end in the New company without missing a beat. I will also use the computer system, servers, and other technology from the old company. I would literally take their website and change the name to my new company name and maybe a few small cosmetic things.

It won't be quite that smooth.

However on paper, I will file for a new business with a new tax ID, new license # for the various states, new location(few miles away), etc.. So on paper it would appear to be a completely different company with a completely different owner. I don't think I would be hit with successor liability because there is no common ownership.

As long as you don't do anything to make it seem like the same company (like hiring ALL the employees and then firing some) you should be ok.

I would be buying all of its assets (and using the same employees in their prior position and expertise in the business) without any of the liability.

Tell me where I'm wrong?

Thanks.

You are not wrong but you are a bit naïve about how its going to work. You REALLY need to get an attorney on board.

 

[Ohiogal]

Is the person who said " ..., there is nothing wrong with buying only the assets of a company if they are being purchased at fair market value. Its a common business practice." Also an attorney?
If attorneys were in 100% agreement, there probably would be no need for lawsuits because the attorney on the losing side would inform their client they have no case.

The first response seem to indicate it was an idiotic move however half the forum thinks its a smart

How can he say that " This idea doesn't speak well of your business acumen. In fact if you a modicum of business experienced you might well know of such laws that permit the voiding of transfers of a debtor's assets made in fraud of creditors." when a Harvard MBA is doing the exact same thing with his company? Controversial perhaps however smart people use the laws of the country to make money regardless of if they agree with them or not.

No she is not an attorney. Not at all. She has NO legal knowledge quite frankly as her responses here show. The attorneys are Latigo, Taxing Matters and I. Re the bolded -- ****** Shkreli did that... and you know where he is going? 7 years in prison. Trump claims to use the laws to make money and he has declared bankruptcy four times and cheated various people and been found to be discriminatory in his business practices by the feds. I can continue.

 

[quincy]

That is a big risk to take, to take on a business like that, that someone else failed at making work.



You would not be letting anyone go because you would not be hiring them in the first place. If you go forward with this you have to understand that you are only buying the assets of the business which does not include the employees. You would be hiring those employees that you wish to hire.

The employees are assets whose contracts can be purchased. In fact, the seller may insist on selling all contracts (including supplier, etc).

There are two parties to any agreement. miogpsrocks may have to take on some of the liabilities if he wants to purchase the assets.

By the way, LdiJ, I reported your other post for its content. You said some pretty foul things about the attorneys in this thread. Not smart.

Ohiogal was referring to LdiJ in her post, by the way. LdiJ has no legal education. Ohiogal also did not list all of the attorneys who post to this forum or who have been vetted by FreeAdvice. She has named those who are most vocal about their law degrees, though.

 

[Ohiogal]

The employees are assets whose contracts can be purchased. In fact, the seller may insist on selling all contracts (including supplier, etc).

There are two parties to any agreement. miogpsrocks may have to take on some of the liabilities if he wants to purchase the assets.

By the way, LdiJ, I reported your other post for its content. You said some pretty foul things about the attorneys in this thread. Not smart.

Ohiogal was referring to LdiJ in her post, by the way. LdiJ has no legal education. Ohiogal also did not list all of the attorneys who post to this forum or who have been vetted by FreeAdvice. She has named those who are most vocal about their law degrees, though.

I was naming those who responded to this thread actually. Whoops. Tax didn't respond to this one. sorry.

 

[quincy]

I was naming those who responded to this thread actually.

I didn't see a post by Taxing Matters.

edit: Ah. You caught it.

 

[Ohiogal]

I didn't see a post by Taxing Matters.

See above... I was wrong about that...

 

[quincy]

LdiJ and STEPHAN are not entirely off base with their posts, as a note. Business assets can be, and often are, bought and sold.

What miogpsrocks wants to do can be doable but from his postings he seems ill-equipped to do it without outside legal help.

And, if he has no knowledge of the business he is looking at purchasing/starting, I predict he soon will be looking for a buyer for these assets he purchased, when his new business starts to rapidly circle down the drain.

 

[miogpsrocks]

As I told you previously there is the possibility that you would be participating in fraud to one extent or another if you were buying the assets of the business for significantly less than fair market value. Otherwise, anyone who tries to tell you that you are doing something wrong is an idiot.

My recommendation is that you simply stop posting here entirely and go get a consult with a local attorney out there in the real world.

Thank you.

Yes, you are correct, I would be hiring the employees that I keep and failing to hire the ones I don't.

You know the law much better than most people on here and better than a lot of actual lawyers out there.

I know it can be done because I have seen other people who are Harvard business graduate do this exact thing and brag about it. It boils down to not common ownership between the old/new company and paying fair market value for assets to avoid being tied in. There are a few states that are the exception but this method works for the vast majority of states.


Thanks.