Bulk Sale Notice

For business owners planning to sell assets worth between $10,000-$2,000,000, understanding California's Bulk Sales law (Commercial Code Section 6102(a)(3)) is crucial for a successful transfer. 

Bulk Sale Notice: What You Need to Know

To meet all Bulk Sale requirements in California, buyers must complete the following steps:

• Buyers request a list of all businesses and addresses the Seller has used in the last three years. 
• Buyers work with a certified business broker and their attorney to draft a Bulk Sale Notice. This document should include a statement of the pending sale, the Seller and Buyer's list of all businesses and addresses used in the last three years, the location and description of assets, the location of the sale, and the expected date of the sale. 
• At least twelve days before the closing date, buyers must file the Bulk Sales Notice with the associated County Recorder in which the assets are located and, if different, the Recorder with the county in which the Seller lives. 
• Buyers publish the Bulk Sale Notice in the same county's newspaper. 
• The Buyer delivers the Bulk Sale Notice to the county Tax Collector, where the assets are located via certified or registered mail. 

If the Buyer fails to comply with these terms, the sale proceeds as usual, but they assume responsibility for liability payments equal to the difference between the creditor's owed debts and the amount the creditor may have obtained if the Buyer complied with California Bulk Sale Law. 

Creditors then have one year to file a claim against the Buyer for non-compliance.

Additionally, the State of California  Franchise Tax Board allows Buyers, their representatives, escrow officer, or title officer to request a Certificate of Bulk Sale via fax or mail to release the business from withholding tax debts in the event of a transfer. 

Be prepared to supply the following information in your request:

• Buyer Information 
• Escrow company information
• Information about the business in question
• Seller information, including California Department of Tax and Fee Administration and Employment Development Department numbers. 

Once the Franchise Tax Board reviews your request, they will either issue a statement showing all liabilities due or a certificate asserting that the Seller does not owe any withholding taxes, interest, or penalties on the business. 

However, keep in mind that this certificate only releases liability under Revenue and Taxation Code Sections 18661-18677 for the Buyer and does not release the Seller from responsibility for any other state or federal taxes. 

Sample Clauses

Not all  California Bulk Sale Notice clauses are the same, nor do compliance terms always apply to a business transfer.

For example, a Buyer may choose to waive the Seller's responsibility for Bulk Sale compliance in all jurisdictions and assume the liabilities as a tenet of the transaction. This agreement generally reduces the sale price by the amount of debt, enabling the Buyer to pay the Creditors without undue financial burden. 

Similarly, the Seller can indemnify the Buyer from all assumptions of liability, stating that they will hold all responsibility for Creditor repayments associated with the business. In such a situation, it is also common to denote that the Seller will not hold the Buyer responsible for damages related to the Seller's failure to pay. 

In most cases, though, Bulk Sale Notice Sample Clauses state that both parties will comply with all of their legal obligations laid out by the  California Commercial Code Bulk Sale law. 

Bulk Sale Agreement Questions

Before drafting the Notice to Creditors of  Bulk Sale in California, all stakeholders should participate in drafting a  Bulk Sale Agreement. 

The best way to ensure all terms and conditions are equitable is to work with a  Certified Business Broker. They will serve as an intermediary to provide a roadmap to the impartial assumption of responsibility, fair business valuation, and compliance with all California Bulk Sale law regulations. 

Why Is a Bulk Sale Agreement Important?

A Bulk Sale Agreement is a protective measure to prevent sellers from abandoning their business debts by undervaluing their property to avoid fully paying off their Creditors. It also secures good-faith Buyers from being responsible for Bulk Sale expenses despite the Seller keeping all proceeds from the business sale. 

A Bulk sale agreement is a legal document that clearly outlines the course of action wherein all parties– Buyer, Seller, and creditors– have protected interest in debts and proceeds from the sale. It typically consists of a list of all assets and liabilities the Seller will transfer to the Buyer once both parties have reviewed the relevant information. 

Because the document is legally binding, the Seller can ensure that the Buyer meets their commitments and is protected from litigation if the Buyer fails to assume responsibility for agreed-upon debts. 

In turn, the Buyer clearly understands the terms of the agreement and is not forced to field creditor demands for previously unknown liabilities. They will also have more context for their financial responsibility should the sale continue as expected. 

How Do I Obtain a Bulk Sale Agreement in California?

Attorneys specializing in business valuations, sales, and management are essential resources for a well-crafted Bulk sale agreement, as they are impartial third parties who can ensure the legality and fairness of said document. 

Working with an attorney alongside your Certified Business Broker will smooth over any bumps you might encounter while pursuing a Bulk Sale Transfer in California. 

How Can I Get a Bulk Sale Agreement Signed?

For a bulk sale agreement to be legally binding, all parties must consent to the terms of the sale, including price, closing date, assets, liabilities, and the pre-sale financial statement.

Once all interested parties have signed, you can file a Notification with the California Department of Justice and proceed with the sale. 

Conclusion

Do you need help navigating a Bulk Sale in California? Are you unsure whether you've met all legal and good-faith obligations for a smooth transition?

A professional  lower middle market business broker and mergers-and-acquisitions expert can give Buyers and Sellers the guidance they need to transfer a business while meeting all legal obligations successfully. 

Selling Your Lower Middle Market Business Now or Not Ready

If you are a retiring business owner looking to exit your lower middle market business in California, here are five tips to get you started:

1. Don't wait until the last minute to start planning your exit. The process of selling a lower middle market business can take a long time, so it's important to start early.

2. Have a clear idea of what you want to get out of the sale. Know your goals and what you're willing to negotiate.

3. Choose the right type of buyer. Not all buyers are created equal, so do your research and find the right one for your business.

4. Be prepared for a lot of due diligence. M&A buy-side due diligence is when buyers will want to know everything about your business, so be ready to provide documentation and answer questions.

5. Be flexible with the terms and conditions of the deal. It's important to be open to negotiation to get the best possible deal for your business.

Rogerson Business Services, also known as, California's lower middle market business broker is a sell-side M&A advisory firm that has closed hundreds of lower middle-market deals in California. We are dedicated to helping our clients maximize value and achieve their desired outcomes. 

We have a deep understanding of the Californian market and an extensive network of buyers, which allows us to get the best possible price for our clients. We also provide comprehensive support throughout the entire process, from initial valuation to post-closing integration. 

Our hands-on approach and commitment to our client's success set us apart from other firms in the industry. If you consider selling your lower middle market business, we would be honored to help you navigate the process and realize your goals.

If you have decided to value and then sell your lower middle market business or still not ready, get started here, or call toll-free  1-844-414-9600and leave a voice message with your question and get it answered within 24 hours. The deal team is spearheaded by Andrew Rogerson, Certified M&A Advisor, he will personally review and understand your pain point/s and prioritize your inquiry with Rogerson Business Services, RBS Advisors

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