What happens if I inherit a lawsuit with the business?

Buyers sometimes assume that once a deal closes, anything from before that date is the seller’s problem. That is not automatically true, and the gap between that assumption and reality is exactly what a well-drafted purchase agreement is built to close.

Why a pre-closing claim can still land on you

In a share purchase, the corporation is the party being sued, and the corporation does not change identity when its shares change hands — it simply has a new owner. A claim arising from something that happened years before closing can still be brought against the same corporate defendant after you own it, regardless of who was actually running the business when the underlying events occurred.

What actually protects you

• Representations and warranties in which the seller states there is no known or threatened litigation, giving you a contractual remedy if that turns out to be false
• A survival period defining how long after closing you can still bring a claim against the seller for a breach of those representations
• An indemnity provision allocating specific financial responsibility for exactly this kind of post-closing discovery
• A holdback or escrow that keeps part of the purchase price available to satisfy a claim that surfaces during the survival period

Where asset purchases differ, but not completely

An asset purchase generally lets you choose which specific liabilities to assume, which is one reason buyers often prefer it. But certain categories — employee claims, environmental liability, and some tax obligations among them — can still follow the business in an asset structure through routes that are not simply a matter of what the purchase agreement says, so structure reduces this risk without eliminating it entirely.

What to do if it happens anyway

If a claim surfaces after closing that relates to pre-closing conduct, the purchase agreement — not general goodwill between the parties — is what determines whether you have recourse. Notify the seller promptly under whatever notice provision the agreement contains, since missing a contractual deadline can itself cost you the protection you negotiated.