What is Successor Liability?

In the sale of a business, some agencies can pursue the buyer if they fail to verify that there are no unpaid taxes or liens on the business. This risk can primarily be mitigated by using a bulk sale escrow to transfer the business.

For example, a buyer purchased an auto service business directly from the seller without going through escrow. Within a few months, agencies started knocking on his door. By the time penalties and late fees were assessed, the debt had grown to over $100,000.

In this transaction, the seller, who was my client, ended up with just enough to pay off the debt and received no return on the sale of the business.

To avoid this issue, it is advisable to use escrow for most transactions