QUESTION
If back taxes are owed would we liable for paying them or could we have the contract worded to address this?
Asked on Aug 15th, 2012 on Taxation - Oregon
More details to this question:
We are considering buying a business on contract from the current owner.
6 ANSWERS
Elder Law Attorney serving Hollister, CA
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Charles R. Perry
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You have no obligation to assume the prior tax liability, and can structure your transaction to ensure that you do not take it on.
You need to be very careful in structuring the transaction, however. A good business attorney will be able to guide you in this process, so that there is no question as to this issue.
Answered on Aug 26th, 2012 at 12:44 PM
Bankruptcy Attorney serving Petaluma, CA
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Law Office of Andrew Kern
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It depends on the structure of the business. If the business is a sole proprietorship or S corp then the seller is solely responsible.
If the business is a C corp. then the business is responsible for paying the taxes and you can include payment of the taxes in the sale, but the government will still look to the corporation for payment.
Answered on Aug 26th, 2012 at 12:43 PM
Appellate Attorney serving Grosse Pointe Farms, MI
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Musilli Brennan Associates, PLLC
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GET AN ATTORNEY NOW.
Answered on Aug 26th, 2012 at 12:43 PM
Probate Attorney serving St. Louis, MO
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Edward L. Armstrong, P.C.
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If back taxes are owed by the current business owner, I would insist that these be paid prior to closing the sale. While you might have a contract provision that calls for them to pay these taxes that contract does not bind the IRS. Make them pay the taxes in full and show you proof that those have indeed been paid.
Answered on Aug 20th, 2012 at 4:52 PM
Tax Attorney serving Portland, OR
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Bullivant Houser Bailey PC
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If you buy the company, the company would still owe its taxes after you are the owner. If you buy the assets of the business, you would not be liable for the seller's taxes.
Answered on Aug 20th, 2012 at 4:50 PM
Buy only the assets of the business from the owner, not its liabilities. If it is a "bulk sale", or a sale of substantially all the assets, the seller may have to get a Tax Clearance Certificate prior to closing the sale.
Answered on Aug 20th, 2012 at 4:50 PM