What Do You Take On When You Buy a Business?

The Short Answer

Most small acquisitions are structured as an asset purchase, and the point of that structure is that you buy the things and leave the liabilities. You take the equipment, the customer list, the name and the goodwill. The seller keeps the bank loan, the lawsuit and the unpaid invoices.

That is the rule, and the exceptions are the reason this page exists. Some debts follow the assets whatever the contract says. Some contracts you are counting on need a third party to agree before they move. And the customers are not property at all, so nothing transfers them except their own decision to stay.

The Debts That Follow the Assets Anyway

Successor liability is the name for a debt that attaches to the business rather than to the person who ran it. The clearest example is unpaid state sales tax, and it is the one piece of state law that reaches into the closing itself.

This site holds that rule for 46states, read at each state's own revenue department or statute. In 27 of them the duty is on the BUYER: hold back enough of the purchase price to cover what the seller owes until the state says otherwise. 44 publish the document that releases you, usually a clearance certificate the two sides request together. Miss it and the debt can follow the assets to you, in some states up to the whole purchase price.

Read your own state's rule in the state guides, and treat it as the thing to start early rather than the thing to check at signing, because a certificate is issued on the state's schedule and not on yours. Payroll tax behaves the same way in many states, and bulk sales law is the older version of the same idea, still alive for some inventory sales.

The Contracts That Need Somebody Else's Permission

A contract is not an asset you can simply carry off. Most commercial agreements contain a change of control provision or an anti-assignment clause, which means the counterparty has to consent before the agreement moves to you. Until they do, you own a business whose supply, software or franchise rights are not yet yours.

The mechanics are an assignment and assumption agreement for the ones that transfer, and a novation where the counterparty wants the seller released and you substituted outright. Ask for the contract list early and sort it by who can say no. The lease is the loudest example and has its own page, because the landlord holds a veto nobody negotiated for.

The Customers Are Not Transferred, They Decide

Nothing in a purchase agreement obliges a customer to keep buying. What you are acquiring is a pattern of behavior that has held so far, and the question worth asking in diligence is how much of it depends on the person leaving. Customer concentration is the measure that matters most: a business where one account is a quarter of revenue is a different risk from the same revenue spread over two hundred.

Ask which relationships the seller personally owns, whether anything is under contract or all of it is repeat habit, and what happened the last time a competitor called. Then plan the first conversations before closing rather than after, which is what the first 100 days is for. Supplier concentration runs the same way in the other direction.

What the Agreement Does About All of This

The contract cannot stop a debt attaching to the assets, so instead it allocates who pays when one appears. Indemnification is the seller's promise to cover what turns up later, and it is worth exactly as much as the seller's ability to pay it a year after they have spent the proceeds.

That is why an escrow holdback exists: a slice of the price parked with a third party for a fixed period, which is money you can actually reach. Where a specific risk is already known, a specific indemnity carves it out of the general limits. And a cash-free, debt-free deal states the same principle at the level of the price: the seller takes the cash, clears the debt, and hands over a business that owes nothing.

None of this is a substitute for a lawyer in the state where the business sits. What it is for is knowing which questions are already answered by the structure and which ones are still open when you sit down to negotiate.

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