California Agreement for Sale of Business by Sole Proprietorship to Limited Liability Company

State:
Multi-State
Control #:
US-04320BG
Format:
Word; 
Rich Text
Instant download

Description

The sale of any ongoing business, even a sole proprietorship, can be a complicated transaction. The buyer and seller (and their attorneys) must consider the law of contracts, taxation, real estate, corporations, securities, and antitrust in many situations. Depending on the nature of the business sold, statutes and regulations concerning the issuance and transfer of permits, licenses, and/or franchises should be consulted. If a license or franchise is important to the business, the buyer generally would want to make the sales agreement contingent on such approval. Sometimes, the buyer will assume certain debts, liabilities, or obligations of the seller. In such a sale, it is vital that the buyer know exactly what debts he/she is assuming.


In any sale of a business, the buyer and the seller should make sure that the sale complies with any Bulk Sales Law of the state whose laws govern the transaction. A bulk sale is a sale of goods by a business which engages in selling items out of inventory (as opposed to manufacturing or service industries). Article 6 of the Uniform Commercial Code, which has been adopted at least in part by all states, governs bulk sales. If the sale involves a business covered by Article 6 and the parties do not follow the statutory requirements, the sale can be void as against the seller's creditors, and the buyer may be personally liable to them. Sometimes, rather than follow all of the requirements of the bulk sales law, a seller will specifically agree to indemnify the buyer for any liabilities that result to the buyer for failure to comply with the bulk sales law.


Of course the sellerýs financial statements should be studied by the buyer and/or the buyerýs accountants. The balance sheet and other financial reports reflect the financial condition of the business. The seller should be required to represent that it has no material obligations or liabilities that were not reflected in the balance sheet and that it will not incur any obligations or liabilities in the period from the date of the balance sheet to the date of closing, except those incurred in the regular course of business.


This form is a generic example that may be referred to when preparing such a form for your particular state. It is for illustrative purposes only. Local laws should be consulted to determine any specific requirements for such a form in a particular jurisdiction.

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  • Preview Agreement for Sale of Business by Sole Proprietorship to Limited Liability Company
  • Preview Agreement for Sale of Business by Sole Proprietorship to Limited Liability Company
  • Preview Agreement for Sale of Business by Sole Proprietorship to Limited Liability Company
  • Preview Agreement for Sale of Business by Sole Proprietorship to Limited Liability Company

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FAQ

Too often, founders rush to form the LLC without having a suitable written operating agreement in place. The operating agreement can state that the members will form an LLC within a certain period or when certain milestones are achieved, and that if those events don't transpire, then the agreement is terminated.

How to Form an LLC in CaliforniaStep 1 Articles of Organization/Application to Register a Foreign LLC.Step 2 Attach Filing Fee.Step 3 Initial Report and Annual Franchise Tax.Step 4 Operating Agreement.Step 5 Employer Identification Number (EIN)

An LLC exists separately from its ownersknown as members. However, members are not personally responsible for business debts and liabilities. Instead, the LLC is responsible. A sole proprietorship is an unincorporated business owned and run by one person.

Changing from a corporation to a sole proprietorship requires you to close down the corporation and start a new business as a proprietor.File articles of dissolution with the state agency that accepted your articles of incorporation.Notify creditors that you are closing down the corporation.More items...

As the sole proprietor, the owner is personally liable for the debts and obligations of their business, even if those liabilities are a result of something an employee did. Corporate structures, including LLCs, protect owners from personal liability.

Though California law requires you to have an Operating Agreement for your LLC, it doesn't require you to file it anywhere. Your California Operating Agreement is an internal document.

All LLC's should have an operating agreement, a document that describes the operations of the LLC and sets forth the agreements between the members (owners) of the business. An operating agreement is similar to the bylaws that guide a corporation's board of directors and a partnership agreement.

Your California LLC Operating Agreement doesn't need to be notarized. Once you (and the other LLC Members, if applicable) sign the Operating Agreement, then it becomes a legally binding document for all of you.

If you currently own a sole proprietorship and wonder whether you can change it to a limited liability company (LLC), the simple answer is yes.

As a sole proprietorship is not registered, you have no support when it comes to liability. An LLC has protection against creditors from seizing your personal assets, such as your home.

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California Agreement for Sale of Business by Sole Proprietorship to Limited Liability Company