Bulk asset Sales and Laws

Most states have strict requirements for doing bulk asset sales to protect both the buyer and creditors of a business. Bulk sales laws prevent a seller from defrauding creditors by selling a business for less than the market value and paying creditors less than the seller owes them, and they prevent the seller from selling a business to a good faith buyer and skipping out on the creditors. Here are the general rules sellers must follow for a bulk asset sale.

STEP One
Understand the definition of a bulk asset sale. it is any sale outside the ordinary course of the seller's business for more than one half the business's inventory and equipment as measured by the fair market value of the inventory and/or assets on the date of the sale. There are exceptions for assets with a net value of $10,000 or less or a value of $5 million or more.

Step Two
File and publish an advance notice of the sale. Generally, the notice must appear at least 12 days before the sale. The buyer has the responsibility for record ing the notice in any county the assets and/or buyer reside. The buyer must publish the sale in a general circulation newspaper in each of the counties and file notice with the county recorder of each county. The buyer must also deliver notice to the county tax collector of each county where assets reside.

Step Three
Pay all creditor claims before the sale is made if the assets total $2 million or less and is either all cash or a combination of cash and buyer obligations to pay cash in the future. If the sale goes through without satisfying creditor claims under these conditions, the obligation to pay creditors falls on the buyer.

Step Four
Creditors have one year from the sale date to file any claims against the buyer or seller for unpaid bills.