What to do if I am purchasing active rental instruments and accounts from a business?
Question Details: I am purchasing the assets and accounts of an existing business. I am moving into their location as a new LLC. The existing business rents musical instruments to customers who prepay their rental. How do I handle past due accounts owing the previous business back rent, whose rental instrument I purchase? And any monies coming into my shop from monthly invoices sent out before I purchase the instruments? Am I entitled to demand funds from the seller to cover prepaid rentals he accepted money as prepayments for customer rentals, and is he entitled to the same for monies invoiced before sale?
You and he can work out any way to handle these issues that the two of you agree to--and you *should * work them out between yourselves and embody the answers in the contract of sale so that there is no uncertainty over your respective rights and obligations.
However, if the contract does not address these issues:
1) If you buy the accounts (e.g. receivables), any money coming in on those accounts goes to you.
2) Any payments for rentals you did goes to you.
3) He keeps any prepaid amounts, however (though if you bought his business bank accounts, you'd get any money leff in those accounts). Since you were not paid for the prepaid rentals, you do not have to honor them, and disgrunted customers can sue him for not getting what they paid for.
But as stated, it is better to work these matters out in a way that works best for the two of you and for the continuity of the business (e.g. so that you don't alienate customers), such as by having him turn over or escrow some amount for the prepaid rentals.