Bulk sale escrows can be defined as an escrow agreement placed on the sale of inventory, business assets, or a company. The escrow is designed to protect the assets of both secured and unsecured creditors. It is designed to eliminate the possibility of the seller using the money from the sale on other things besides taxes owed to a variety of government agencies or for monies due to vendors or other outstanding debts, depending on the business type.
If a business is experiencing financial difficulty, it can lessen its issues by downsizing business and selling portions of inventory or business assets. An escrow agent will collect the funds from the seller to protect them from being used on unprofitable business deals. The escrow agent will then forward the funds to the appropriate parties. Generally, escrow fees will be charged for this service and the service costs are split between the buyer and the seller. However, the two parties can agree in writing as instruction to escrow on the terms and requirements of closing, including cost splits.
Any purchaser buying assets or a business is generally not liable for the seller’s obligations unless the buyer agrees to take on those obligations. There are a number of laws that determine if the successor is to become liable for the purchase of a business, the bulk sale law being one. If the buyer fails to ensure that the bulk sale transaction agrees with the law, the buyer will be responsible for the seller’s debts, and be subject to the seller’s creditors collection attempts, as well as government agency monies due. However, if a buyer gets locked in to paying for the seller’s debts when it was not part of the agreement, the buyer can be reimbursed. Therefore, in most cases, a buyer will want to ensure that a business purchase complies with the bulk sales law and using an Escrow Company is your best bet to ensure that everything is handled properly and all parties are safe from post-closing issues arising.
Professional Escrow Services
At Ultimate Escrow Services Inc we look forward to guiding you through the process and making your real estate transaction as easy as possible. As a full-service escrow company, our experienced escrow officers will handle all of your escrow needs and ensure a smooth and trouble-free closing.
Ultimate Escrow Services, Inc. DBO License #963-1901
Ultimate Escrow Services, Inc.
DBO License #963-1901