1. What Will the Purchase Actually Transfer?
Confirm the legal owner, transaction structure, and assets included in the price. Buying selected assets differs from acquiring ownership of the entity that operates the business.
Assets, Ownership Interests, and Liabilities
An asset purchase agreement should identify purchased assets, excluded property, and assumed obligations. Contractual exclusions do not necessarily prevent statutory successor liability or third-party claims.
In an ownership-interest purchase, the acquired entity generally retains its existing liabilities. Review company approvals, signing authority, and contracts that require consent when ownership changes.
Confirm ownership of trade names, websites, customer records, and intellectual property. An asset used by the business may belong to its founder or another entity, requiring a separate transfer.
2. Can Operations Continue after Closing?
Check whether the buyer can use the premises and obtain necessary registrations. First confirm the address’s municipal jurisdiction: City of Los Angeles procedures do not apply throughout Los Angeles County.
Registration and Operating Approvals
The Los Angeles Office of Finance administers Business Tax Registration Certificates (BTRCs), which are not transferable. Confirm whether the transaction requires a new registration or an update to the existing taxpayer’s records.
A BTRC does not establish compliance with zoning, building, fire, or health requirements. Ask each issuing agency whether ownership or operational changes require approval, inspection, or a new application.
Lease Consent and Seller’S Permits
Review the commercial lease for assignment restrictions, change-of-control clauses, renewal rights, and guarantees. Keeping the same tenant entity does not necessarily avoid a consent requirement.
CDTFA seller’s permits are also not transferable. A new owner conducting taxable sales generally needs its own permit; an ownership change within an existing entity requires separate review.
3. Which Obligations Could Affect the Buyer?
Examine tax records, secured debts, and unfinished customer commitments before releasing funds. Financial statements alone may not reveal restrictions on assets or obligations that applicable law imposes.
Tax Clearance and Purchase-Price Withholding
California Revenue and Taxation Code §§6811–6812 governs withholding and purchaser liability in covered business sales. Failure to withhold as required can create personal liability for the required amount, up to the purchase price.
Request Tax and Fee Clearance through CDTFA’s online services or a local office and coordinate withholding before payment. A seller’s promise to pay does not replace statutory requirements.
This clearance has a limited scope. Review federal taxes, payroll obligations, and city business taxes separately as part of tax compliance.
Liens and Outstanding Commitments
Check whether purchased equipment or inventory secures financing and arrange appropriate payoff and release documents. Identify responsibility for customer deposits, prepaid services, warranties, pending claims, and employee obligations.
Compare disclosure schedules with contracts, account statements, and claim notices. If records conflict, request an explanation and supporting documents before accepting the seller’s assurances.
4. Put Unresolved Issues into the Agreement
Translate each material finding into a closing condition, payment arrangement, or right to withdraw. These protections require negotiation; they do not arise automatically because the buyer discovers a problem.
Conditions, Holdbacks, and Termination
Require necessary consents and releases before closing, with clear deadlines and responsibility for obtaining them. Address deposit refunds and termination rights if a condition fails.
Indemnification allocates losses between the parties but does not bind government agencies or other creditors. Define covered losses, claim procedures, limits, and any escrow supporting payment.
Specify how the seller must report changes between signing and closing. A new claim or lost customer contract may affect whether agreed closing conditions remain satisfied.
Governing Law and Dispute Terms
Separate governing law from venue and arbitration. California law may govern relevant state-law issues, while applicable federal duties remain independent of the contract.
A governing-law clause does not create federal jurisdiction. Review where disputes may proceed, who pays arbitration costs, and whether urgent court relief remains available.
5. Frequently Asked Questions
Preliminary documents and personal signatures can create obligations before closing. Review them alongside the proposed purchase terms.
The wording and circumstances control its effect. Confidentiality, exclusivity, or expense provisions may bind the parties even when the proposed purchase remains nonbinding.
An LLC does not cancel a guarantee an individual signs. Check its scope, duration, and release conditions before guaranteeing financing or lease obligations.
6. Prepare for a Purchase Review
Gather the agreement, ownership records, lease amendments, permits, tax notices, financing documents, and claim records. A Los Angeles business lawyer can assess how unresolved issues affect closing and which contractual protections fit the transaction.
20 Oct, 2026
