Shannon Fisher posted a new question on 8/12/2009
I know that buying through escrow would be a direct transfer of the existing business to myself and that buying through bulk sale would be like buying only the merchandise of the business. The escrow route costs money and the bulk sale does not. I just want to make sure that there are no hidden problems with one or the other of these. Any info would be greatly appreciated.
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Bonnie Copeland Responded on 8/13/2009
Shannon, I'm not a lawyer, but I do not think you are correct.
I believe that ANY business sold in California has to conform to the state's Bulk Sales Laws AS LONG AS 50% or more of the business' inventory transfers to the new owner. I also believe this is true regardless of whether a broker is involved. Further, I beleive that escrow offices that handle the sale of businesses have a BULK SALE OFFICER who makes sure that the business sale complies with all Bulk Sale Laws.
The Bulk Sales Laws were enacted to protect the BUYER of a business from being bilked by the seller. Before the bulk sales laws, dishonest sellers sold businesses that contained inventory the business didn't own. By the time the true owner of that inventory showed up to take it back, the business seller had disappeared with the money and the business buyer was out of luck!
Escrow -- and lawyers, as David recommends -- are there to protect YOU. They will make sure that the seller has paid all taxes due because, if he doesn't, YOU will be responsible for paying them even if you didn't have the employees or earn the revenue they were based upon.
There are a lot of details to transferring a business, and you may not be aware of them alEscrow and/or an attorney will make sure that your respondibility for the business STARTS on the day you first own it.
It may be initially cheaper to buy without Escrow or an attorney, but it is likely to be FAR more expensive in the long run NOT to use these prote
