If I purchase stock and equipment from a company going out of business, could I be responsible for their tax liabilities?
April 22, 2025
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I appreciate all of the information you’ve shared and I’m ready with your answer. After you review it, please let me know if anything is unclear or if you have any questions.
In an asset sale, you will be fine; liabilities, including tax debts, generally remain with the seller unless explicitly assumed by the buyer. Successor liability for tax obligations is also limited in asset sales (26 U.S.C. § 6901). However, I would still add a clause that the seller represents that assets are free of liens and that the seller will indemnify the buyer from any such claims.
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If I purchase remaining stock and equipment from a company that is going out of business, is there any way I could be responsible for their tax liabilities?
I understand your concern about potential tax liabilities. Have you already signed any agreements or contracts regarding the purchase of the remaining stock and equipment?
No, we have not.
Are you aware of any outstanding tax debts or issues that the company going out of business may have?
As far as we are aware, there aren't any.
Is there anything else the Lawyer should know before I connect you? Rest assured they’ll be able to help with tax liabilities.
Not that I can think of.
Hello and welcome to AskaLawyer! My name is Daniel, and I’m a licensed lawyer with over 21 years of experience. I’m really sorry you’re going through this and I’ll do my best to help. To clarify, it’s an asset sale, correct?
Correct.
Okay, thank you. I believe I have everything I need. Is there anything else you’d like me to consider before I finalize your answer?
No, that’s everything.
I appreciate all of the information you’ve shared and I’m ready with your answer. After you review it, please let me know if anything is unclear or if you have any questions.
In an asset sale, you will be fine; liabilities, including tax debts, generally remain with the seller unless explicitly assumed by the buyer. Successor liability for tax obligations is also limited in asset sales (26 U.S.C. § 6901). However, I would still add a clause that the seller represents that assets are free of liens and that the seller will indemnify the buyer from any such claims.
Should we have an attorney draft up a bill of sale with that clause in it or is this something we can do ourselves?
That would be best here. I think having local representation would be helpful. You can hire pro bono counsel through the State Bar Association or the American Bar Association. You can also hire private counsel using www.avvo.com or www.justia.com.
Okay, thank you for your time.
It’s been a pleasure answering your questions. Should you have any more questions at any time, I’m always happy to help. Please don’t hesitate to return to AskaLawyer whenever you need more help.
