Don’t be confused or intimidated by any terms or abbreviations in the M&A world. You’ll find answers here.
When a business sells nearly all of its inventory to a single buyer and the transaction is not in the ordinary course of business.
Bulk sale laws are designed to protect creditors from the seller liquidating the inventory and running off with the proceeds — if the creditor has financed the inventory. For example, in California, businesses must comply with the bulk sale requirements when selling a business. They typically hire a third party, such as an escrow company, to perform these services. The sale of a business is legally classified as a “bulk sale” and the parties must comply with the requirements of the “bulk sale laws,” or face potential penalties. Bulk sale laws have been repealed in all but a handful of states. If your business is located in a state where bulk sale laws have not been repealed, then you will normally retain an escrow agent to conduct the closing and ensure the sale complies with the requirements.
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