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Can a business be sold if it owes back taxes and doesn't disclose this?

Can a business be sold if it owes back taxes and doesn't disclose this?

Q: Can a buyer sue if they discover undisclosed taxes after purchasing a business?

Yes, a buyer may have grounds to sue if they discover undisclosed taxes after purchasing a business. If the sales contract did not clearly outline the liabilities or if the seller intentionally concealed information, the buyer could seek legal remedies for any financial losses incurred due to the undisclosed taxes.

Q: How can a buyer protect themselves from hidden liabilities in a business sale?

A buyer can protect themselves from hidden liabilities by conducting thorough due diligence, including reviewing financial statements and tax records. Additionally, including specific clauses in the sales contract that outline assumed liabilities can help clarify responsibilities and protect the buyer from unexpected debts.

Full question:

Is it legal for a business to be sold when the business owes back taxes to the government and this is not disclosed to the buyer of the business?

Category: Corporations
Date: 04/07/2025
State: Florida

Answer:

When a business has unpaid back taxes, such as sales, unemployment, or FICA taxes, these can be hidden liabilities for the buyer. It's crucial to conduct a thorough review of the business's financial records, but even this may not reveal all liabilities. If the sales contract states that the buyer will assume certain liabilities, it should clearly specify which ones and their amounts in the written agreement. This ensures the buyer is not held responsible for undisclosed liabilities.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

What happens if a business is sold without disclosing back taxes?

If a business is sold without disclosing back taxes, the buyer may unknowingly assume these liabilities. This can lead to legal issues, as the buyer could be held responsible for paying the owed taxes. It's essential for buyers to conduct due diligence and review financial records to uncover any hidden liabilities before finalizing a sale.

Can a buyer sue if they discover undisclosed taxes after purchasing a business?

Are there legal protections for buyers regarding undisclosed business debts?

Yes, buyers have certain legal protections against undisclosed business debts. Depending on the sales contract, buyers may be able to argue that they were misled or that the seller breached their duty to disclose all liabilities. It's advisable for buyers to consult with a legal professional to understand their rights and options.