←back to thread

Lessons from my first exit

(mtlynch.io)
410 points saeedesmaili | 1 comments | 14 Nov 24 07:32 UTC | HN request time: 0s | source
Show context
aimazon ◴[14 Nov 24 18:12 UTC] No.42139235[source]▶
“My lawyer warned me that when I sell my business, I lose limited liability protection. If the purchase agreement didn’t limit my liability to the buyer, the buyer could later sue me for any amount, even if it exceeds what they paid in the acquisition.”

“Sales below $1M are usually asset sales, meaning that the buyer is purchasing assets from the business but not the business itself. So, I technically still own a company called TinyPilot, but I transferred all of its physical and intellectual property to the new owner.”

Aren’t these contradictory? If it’s an asset sale, the deal is between TinyPilot LLC and the buyer for the assets.

replies(2): >>42139390 #>>42139809 #
1. amccollum ◴[14 Nov 24 18:57 UTC] No.42139809[source]▶
I don't know about the author's case, but often asset purchase agreements will make the principals / shareholders party to the agreement personally with specific liability provisions. If there are no assets left in the company, the buyer has no recourse against it, since it is essentially an empty shell (in certain cases, insurance could be an exception to this). As a buyer, you will want to have some protection against issues you don't know about at the time of sale (perhaps because you weren't told about them, or the seller was negligent).