In most states, checking if a business is legal is easy. In Texas, it involves a specific dance with the Comptroller’s office regarding Successor Liability.
The Myth of the Asset Sale
Most people think: “I’m selling my equipment and inventory, not my LLC. Therefore, the buyer doesn’t have to worry about my old tax returns.”
The Reality: Texas Tax Code § 111.020 states that if you sell a business or its stock of goods, the buyer is liable for your unpaid taxes (Sales Tax, Franchise Tax, etc.) unless they withhold the purchase price.
The Deal Hurdle: The “Certificate of No Tax Due”
To protect themselves, the SBA Lender and Title Company will demand a Certificate of No Tax Due before they wire the money.
- The Bottleneck: Getting this certificate isn’t instant. The Comptroller often reviews the account before issuing it.
- The Risk: If you have a missing “zero balance” report from 4 years ago, or a small unpaid penalty, the state will refuse to issue the certificate until it is fixed.
The Delay Risk
We have seen deals worth millions grind to a halt for 3 to 4 weeks simply waiting for this piece of paper because the seller wasn’t prepared.
- In a fragile deal, a 4-week delay gives the buyer too much time to get cold feet or “re-trade” the price.
The Strategy: Check With Your CPA Now
You don’t want to find out about a missing filing on the day of closing.
- Action Item: Ask your CPA specifically: “Are we 100% current on all Franchise Tax and Sales Tax filings with the Texas Comptroller?”
- Ensure there are no “Forfeited” statuses or open periods. If there are, fix them now while time is on your side.
The bank handles the paperwork, but you handle the consequences of a delay. Make sure your record is clean before the lender runs their check.