Can a someone sue ifa business was sold to another party?
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Can a someone sue ifa business was sold to another party?
My mother-in-law owns a private school in the town where Ilive and didn’t realize that her insurance had lapsed. She had a volunteer fall down due to a mopped floor with a “wet sign” in sight. This lady is threatening to sue her, so she is wondering if she sells the school to me if that will stop the lawsuit? If so, do we need to put all things in my name such as business license, corporation bank account, tax ID etc? She has insurance now but like Isaid she did not realize that the insurance had lapsed when the accident occurred.
Asked on January 10, 2012 under Employment Labor Law, Mississippi
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
No, the lawsuit will not be stopped. What will happen is:
1) If the business is sole propretorship (not a corporation or LLC), then your mother would still be potentially liable, since she was the owner when the accident occured; a sole proprietorship has no independent existence, and the owner and the business are one in the same legally.
2) If the business is a corporation or LLC, the business is its own entity and will be liable. Therefore, if you buy the corporation or LLC itself (e.g. buy the shares), then it'll now be "your business" which is liable; if you buy only the good will and assets, it'll be the corporate shell, which remains with your mother, which is potentially liable.
Number 2, above, brings up an important point: if the business is an LLC or corporation, then your mother should not be personally liable for the fall--the most she should have at risk is the business itself. It's the case of the business being a sole proprietorship that puts your mother at significant risk.
Also note that the injured person cannot sue for any amount she wants--she can only get an amount commensurate with her medical costs (if any), lost wages (if any), and degree of pain and suffering--with only significant disability, impairment of life, disfigurement, or long-lasting major pain resulting in significant awards. If she was hardly hurt, there should be very little that she could recover even if she sues and wins.
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