Closing the Deal:
Tax Clearances and other Legal Requirements

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3) Check for recorded security interest or liens. Before closing the purchase, your attorney should check with the appropriate state office (usually the Secretary of State) to determine whether anyone has recorded a "security interest" (a lien or chattel mortgage) against the personal property of the seller's business, For a fee, the Secretary of State's office will generally provide a listing of any security interests that have been recorded as a lien against the assets of the business you are buying, Also, if the transaction involves the purchase of real estate, you should have a title search performed to determine if the seller has good and marketable title. This search will disclose any recorded mortgages or other claims against the property that the seller has not disclosed to you.

4) Check on the applicability of any state tax clearance certificates that will include state employment, sales and use taxes. In cases where there is a liquor or beer license being transferred, this certificate must be received by the appropriate transfer agencies before a liquor or beer license will be transferred to the new owner.

5) Review the terms of any important contracts, such as leases and franchise agreements that will be assigned to you. Make sure that the assignment is possible under the terms of such contracts without any detriment to you. Similarly, if you are acquiring a business in a certain regulated industry, particularly relating to food, health, or liquor sales, make sure that proper legal steps are taken to transfer any federal, state or local licenses. Finally, in most states, you have only 90 days or so after acquiring an ongoing business to apply for the right to acquire the seller's unemployment tax experience rating. This may save you quite a bit in state unemployment taxes, because you will be able to "inherit" the seller's lower tax rate, as a "successor employer," rather than paying the regular unemployment tax rate applicable to a new employer. Be sure that you don't miss the deadline for making any required election.