We bought a business towards the end of last year and we are finding that the seller mislead us on the financials and the business model. I was wondering if anyone else ran into this problem and what I should do - what is my recourse

In some (and I believe most) states there is a form a form of fraud (fraud in the inducement maybe) that can be prosecuted, it would mean that you could lein on his assets if he has any for the cost of the business, or get your money back and return to him the business. But if you need to consult an attorney maybe even the one you used for the due dilligence on the business, because if they could not find these flaws they either failed to do their job and you may have someone else to look at, or this guys fraud was thorough enough to obfuscate any truths.

Are you able to make any return on the business, or is it just not as presented? Is the slowdown in returns based on some customers leaving out of loyalty? Did the pervious owner sign a non compete clause or did he just take the money and a few of the clients with him?

I am not an attorney, ad any advice I give is from a laymans position so consult an attorney...

I would report the seller to the local attorney general as well as your own attorney general. Depending if it is an internet site, they also have an online internet fraud reporting run by the fbi.

[quote=WonderingWanderR;31240]Are you able to make any return on the business, or is it just not as presented? Is the slowdown in returns based on some customers leaving out of loyalty? Did the pervious owner sign a non compete clause or did he just take the money and a few of the clients with him?

QUOTE]

We have made a few sales but not anywhere near the level he claimed. Most of the customers are one time purchasers. The previous owner did sign non compete so he is not taking customers. We were just mislead on the numbers he provided some would say scammed.

The best thing you can do is hire a lawyer then go to the seller and threaten them with legal action. If they do not respond go to the authorities. Depending on the business there are multiple local and national agencies you can go to.

I would tread carefully because in most cases of fraud people do not get their money back, I would try to approach them amicably while you carefully begin to research and document the firm in case you have to take the next step.

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