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Ask David Weilbacher, Esq. Your Own Question
David Weilbacher, Esq.
David Weilbacher, Esq., Attorney
Category: Business Law
Satisfied Customers: 335
Experience:  Criminal & Civil Litigation, Estate Planning, Probate, and Bankruptcy
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Corporation sale

Customer Question

I bought a corporation which was a restaurant and sold me some equipment in the corporations name also transferred a lease from the corporation to my corporation we closed at a title company where it states under oath that his corporation is in full effect and legal standings now that i get into the place a couple months later he is talking about trying to take it back and when I look through all the documents everything looked fine but when I went to the Secretary of states office website it said his corporation has be Admin dissolved from the date of the closing at the title company does this make this transaction void? This is in Arizona
Submitted: 8 years ago.
Category: Business Law
Expert:  David Weilbacher, Esq. replied 8 years ago.
Are you sure you bought the corporation, or did you just by the assets of the corporation. It is not unusual for a corporation to be dissolved upon the selling of its assets and the settlement of its debts. It would be impossible to give you any real guidance considering that business acquisition are a complex matter. I would need to review the acquisition documents to determine exactly what you bought. If you were represented by an attorney during this transaction, I suggest you contact that attorney and discuss the recent development.

If you were not represented, I suggest you retain a business attorney to review the transaction documents, and provide you with an opinion regarding what you actually bought, and the impact of the former owner's recent statements.

When you entered in to this transaction, did the former owner sign an agreement stating that he may not engage in the same business within a particular geographic area for a certain amount of time?

Customer: replied 8 years ago.
Well we signed a promise note in the name of the corp. for me to make payments to I put down 10k and the corp. held back the rest. So I think he intended on still doing business with the company since it wasn't an actual sell of the company I just bought the assets but shouldnt the corp be active before doing any type of legal transactions?
Expert:  David Weilbacher, Esq. replied 8 years ago.
Yes and no, the corporation does not necessarily need to be active in order to perform business. The corporation can do business in the traditional sense, but it cannot file a lawsuit or make use of the court system. Before a corporation whose charter has been canceled can make use of the courts, if must be reactivated.

Customer: replied 8 years ago.

So, just to make sure I understand a person can have a dissolved corp. and still enter into contracts? I guess I dont understand it's like when I drive and have a license and Its suspended or revoked by the state I can't drive a motor vehicle but he has a entity that has been revoked by the state be still can do business and enters into contracts and that perfectly legal. That's not fraud and the contract is still forcible?

Expert:  David Weilbacher, Esq. replied 8 years ago.
That is correct. The disadvantage of operating this why is that the revoked business cannot use the courts to enforce its contractual rights. If this individual you purchased the business assets from is talking about starting to actively engaging in business, he will most like take steps to reactive the revoked corporate charter.

Customer: replied 8 years ago.
Ok one final thing do I have any recourse if I feel he frauded me out of my money?
Expert:  David Weilbacher, Esq. replied 8 years ago.
In what way do you believe you were defrauded?
Customer: replied 8 years ago.
The first day I had the business he took a 2k order out the computer 500$ of credit card sales out of my system. The employees that were in the business that was suppose to show me the franchise was making everything incorrectly to make customers stop coming the old owner and the employees where having meetings about how to take it back (since the rent was now caught up)
Expert:  David Weilbacher, Esq. replied 8 years ago.

I believe you may be correct. As I stated before, commercial transactions are very complicated from a documentation stand point, but when you throw fraud and what appears to be an active campaigned to harm your business and steal from you, it becomes even more complex. Please, do yourself a favor, and hire a business/transactional attorney to review this matter in detail so that your business interest and investment are protected before your business ans reputation are irreparably harmed by this individual.