Am I on the hook for severance that was owed before I even bought the business?

It depends entirely on how the business was bought. In a share purchase, yes — if an employee was terminated and severance became owing before closing but wasn't actually paid, that debt belongs to the corporation, and since you now own that same corporation, it's effectively your debt too, unless the purchase agreement specifically addresses it through a price adjustment, holdback, or seller indemnity.

In an asset purchase, the answer is generally no, because you and the selling corporation are different legal entities, and a liability like unpaid severance that arose before closing is exactly the kind of thing an asset deal is meant to let you leave behind, provided your purchase agreement is clear that you aren't assuming pre-closing employee liabilities.

The practical lesson either way is not to assume: have your lawyer review employee records for any recent terminations with severance still outstanding, and make sure the purchase agreement is explicit about who's responsible for pre-closing amounts, rather than relying on the deal structure alone to sort it out after the fact. A Treadstone business lawyer can build this into your due diligence and purchase agreement.