Does a company who bought out another company assume responsibility for the outstanding bills?

UPDATED: Aug 4, 2011

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Does a company who bought out another company assume responsibility for the outstanding bills?

I work for a Heating and A/C company. We have an outstanding bill to a manufacturing company who in the last 4 months was bought out by a larger company. Is it now the larger company’s responsibility to pay the outstanding bill that was in the name of the previous company? I called and talked to the same contact at the new company as I had at the old comp nay. He told me that the company only bought the assets so the debt remained with the first company.

Asked on August 4, 2011 Wisconsin


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

You contact, unfortunately, may be right. There are two ways to buy a company. The first is to buy the corporate (or LLC) entity--the "company," if you would. If that is what happens, then the new owner is responsible for the bills, since he, she, or it now owns the same legal person or entity which incurred the obligation.

The other way is to simply buy the assets of the old company--i.e. the customer files, the inventory, the equipment, etc. Buying assets does not obligate one to the bills of the old. In this case, unless you can prove some sort of wrongdoing (e.g. it was "sold" to the same person, specifically to defraud creditors), you can't collect from the buying company, though you may still be able to seek payment from the old company (if it still exists, even as a relatively inactive "shell" but one with assets you could reach) or potentially from the old owners (if the company had been a sole proprietorship or partnership, so owners were personally liable, and not an LLC or corporation).

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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