Taxpayer owes back taxes to CA Board of Equalization. TP is considering selling his business' assets and would like to pocket the proceeds. I do not believe a tax lien has been filed by the BOE. To double check, I will check the county recorders office and the secretary of state. If no tax lien has not been filed, and the business is sold for a fair price, are there any fraudulent conveyance issues? Will the sale of the business violate any tax provisions or need to pay delinqunet taxes?
I am the taxpayer/debtor/seller.
You are engaging in the purchase of business assets that you know has delinquent sales taxes (at least). You have not indicated that you have any form of representation, or a business escrow in this matter which could be a recipe for disaster for you because the potential problem that needs to be addressed is not whether the seller has engaged in a fraudulent conveyance, but whether the buyer (you) has purchased the business assets with knowledge of the tax delinquency can be subjected to the liability for engaging in a conspiracy with the seller to defeat the tax.
An escrow and either a broker and/or attorney are normally employed in he normal course of the business sale of assets. The escrow and a professional protect the buyer from any potential liabilities of the seller. In this instance, you know about at least one potential liability, and there may be more that have not been disclosed to you. A business escrow is a small price to pay to protect yourself from known tax liabilities, the potential for unknown liabilities, or potential fees to defend yourself after the asset sale.
You have not indicated that you have a professional preparing an agreement for the purchase of the business assets. Are your drafting the agreement? Does the agreement contain warranties of the seller? Does the agreement contain an indemnification provision if the sales tax liability (or any liability) is asserted against you?
The purchase of a business is a significant financial event. Without the appropriate safeguards, it is a risky process that should be avoided at all costs because once the buyer gets his payment, you may be stuck with far less than you bargained for and no recourse.
Phillip M. Smith Jr.
Los Angeles Tax & Business Attorney
Call: 855 IRSTAXBIZ
THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. The answer to question does not create an attorney-client relationship or otherwise require further consultation. Mr. Smith is licensed to practice law throughout the state of California with offices in Los Angeles County. He is authorized to handle IRS matters throughout the United States, and is also licensed to practice before the United States Tax Court. His phone number is 323-292-4116 or his email address is firstname.lastname@example.org.
Facts seem to be incomplete. I see a lot of PMS excellent answers that went in one direction because of insufficient facts.
Is there an entity or is this a sole proprietorship?
If an entity is it disregarded LLC or partnership?
If sole, what could the lien be placed upon? You have huge manufacturing machines?
Do you have other creditors?
Is this a sales tax problem?
You say "the business" as if it were unitary. Why do you consider it so? Are there trademarks? are there big machines subject to a Purchase Money Security interest?
Please also read the case of Ilko, especially if there is a sales tax liability and if you have an entity.
Have you neglected the laws that "shift" BOE and FTB liability upon events happening in the business?
What is it that makes you think that "liens" trigger "fraudulent conveyance issues" exclusively.
Lots of possibilities. Lots of questions. If you want to brainstorm, call late one day this week.
Curt Harrington Patent & Tax Law Attorney Certified Tax Specialist by the California Board of Legal Specialization PATENTAX.COM This communication is general information and not legal advice, and does not create an attorney-client relationship. This communication should not be relied upon as any type of legal advice. Please note that no attorney-client relationship exists between the sender and the recipient of this message in the absence of either (1) a signed fee contract and (2) remission of an agreed-upon retainer. Absent such an agreement and retainer, I am not engaged by you as an attorney, nor is any other member of my law firm.