During the purchase of a business, the buyer must do many things to ensure personal protection and the protection of his or her investment. Getting an indemnity, while optional, is important. If you are in the midst of purchasing a business, knowing how an indemnity can protect you can help you decide whether or not an indemnity is necessary for your transaction.
Do you need an indemnity for the purchase of a business?
When a company changes hands, that company can still be sued because of something that happened before the business was purchased. One of the ways to protect against this kind of occurrence is by getting an indemnity that states the seller will defend the lawsuit and pay for associated costs. This will help ensure that if your company is sued, you will not be responsible for resulting fees and judgements.
How can you get an indemnity?
An indemnity is a common business law agreement that can be written by your business lawyer.
Are there any other ways that you can protect yourself from a lawsuit against the business you are purchasing?
Even if you plan to get an indemnity, it's still important to thoroughly check all business records and financial transactions before making a purchase of a company. This will give you an understanding of the company's business practices and financial history, and will help you assess the risk of potential lawsuits down the road. These records should also be reviewed by your business lawyer as well as your accountant. Together, they will be able to decide whether or not the company you are thinking about purchasing is a likely target for future lawsuits.
You can also protect yourself by ensuring that the lawyer who helps with your purchase is qualified to handle a business purchase of the type that you are hoping to make. Not all lawyers will be equal in their ability to handle your purchase. When choosing a lawyer, interview several potential candidates. Ask each attorney about the different purchase cases they have worked on. Lawyers who have worked on purchases of businesses that were of a similar size, price point and industry will be better qualified and more capable of recognizing discrepancies that could open you up to liability later on down the road.
By hiring a qualified business lawyer and getting an indemnity, you can reduce your risk and ensure a safer business transaction. For more information, speak with a business lawyer like Caldwell Kennedy & Porter about your upcoming business purchase.
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