Things to Know About Bulk Sales

Real estate is one of the most secure investments. If a community economy is growing, the real estate in that area should appreciate in value over time. However, if you want to purchase significant real estate from a business, you will need to review the laws concerning bulk sale with real estate Sacramento CA.

Definition

Bulk sales involve purchasing business assets outside a company’s normal business activity. In California, this includes the sale of equipment, inventory and other assets that result in more than 50% of the business’ fair market value.

When you purchase a business or its assets, you are not responsible for the former owners’ obligations unless you agree prior to purchasing the assets or the sale is illegal. Business creditors must be notified when bulk sale transactions occur.

Purpose of These Laws

Bulk sales laws were developed to ensure that taxes (state laws) and bills were paid by business owners (federal laws). For example, some businesses will sell off or transfer their assets so they don’t have to pay state sales taxes. However, the person who purchased the assets must then pay the sales taxes. In addition, during bankruptcies, businesses may sell off significant assets to avoid surrendering them to their creditors for little or no cash. Therefore, many bulk sales laws require that the income from these types of sales be put in escrow.

Evaluating Bulk Sales

Business owners can sell business assets at public sales or auctions where multiple buyers purchase goods at fair market value. Even if these businesses are closing, this sale is fair. However, prior to any sale, business owners have to submit paperwork to their creditors explaining the sale. In addition, the owner needs to register the sale with the state so taxes can be collected.

If a business is selling most of its assets to a single party, the sales price is not close to market value and the sale is a secret, the sale is probably not legal.

Consider consulting an attorney before participating as a buyer or seller in bulk sales.