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When is a business a successor company?

On Behalf of | Jun 29, 2023 | Business Planning

Not all businesses in Oklahoma start completely from scratch. It is possible you had created a business at some point but had to close it down. However, you might consider creating a second business called a successor company.

Sometimes a successor company succeeds where the previous one failed. Here is a look at the characteristics that make up a successor company.

Management and workers

Chances are that a successor company will have the same ownership and management as the previous business. In general, a successor company will involve all or nearly all of the same leaders and employees.

Property and products

A successor company typically offers the same products or services as the prior company. However, the leadership might alter the products to account for factors that caused the previous business to fail.

Additionally, a successor business can utilize the same equipment, inventory and vehicles. In some cases, successor companies even hold on to the building or property used by the old business.

Benefits and disadvantages

Creating a successor company cuts down on the need to train a new workforce or acquire inventory and equipment. Lessons learned from the prior business can also help the new business be successful.

Still, forming a successor company may invite liabilities. Creditors might come after your new company for debts owned by the previous business. Still, successor companies generally do not continue the liabilities of an old company if the successor business is not too similar to the previous business.

Liability risk is something to consider when creating a business in Oklahoma. There are many kinds of business structures to choose from, so creating a new company with few or no links to an old one could be preferable.

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