tax issue

We are looking at buying a pizzeria, the owner informed us that there are 3 years worth of back personal property tax owed…(not on the building) If I buy the business, how would I insulate myself from that?
we would keep the name of the business but the owner of the strip mall wants us to move it to a much nicer location in town, currant building is really old and he has a vacant restaurant (6 moths old) we will be getting the pizzeria basically at cost of used equipment, wife wants out. husband passed away a couple years ago. So my question is this; will those back taxes follow me? should I get something in writting? and whats the best…sole proprietor, LLC?

HI XL:
I am not a lawyer but my comments would be.

Apparently the Tax lean is on the equipment so I would determine the amount of the lean and write one check to the state for the lean amount and one for the balance of the equipment cost to the owner.

You best get a lawyer to handle the paper work.

Another thing I mention to those buying a shop or in your case the equipment. Make sure all the equipment will meet the current health, building and fire department codes.

Codes are being constantly up dated. You should have the various inspectors in before you buy to check the equipment out.

George Mills

I had to go make a pizza after typing this, while I was gone George said close to the same thing I typed but I had already typed it so here it is.

Just another question though, how healthy was the business if they were not paying taxes?

This sounds like one of those 'Seek qualified legal advice" moments.

I am not such a person, but I can tell you that in our state, the county hounded me for years for unpaid business personal property tax on the equipment in the store because I did not know any better and bought stuff with an overdue tax bill. During the time the tax filing was due the PO had closed shop and quit paying stuff and the equipment belonged to a leasing company 1200 miles away. Nobody cared about paying the tax.
The county could legally have confiscated all my equipment and sold it at auction, but they were more reasonable and eventually just wrote off the debt. In SC the tax debt stays with the equipment and not the owner. I would suggest you ask the attorney that is going to protect your interests in the sale if it is possible to put in the contract that the current owner settle the tax debt with proceeds from the sale. I am not sure how this would work, I assume an amount placed in an escrow account or something, as I said I am not qualified legal advice.

Rick

  1. Get legal counsel

  2. Ask your lawyer about at least 2 things: A) something called the "Bulk Sales Act, and B) avoidance of buying the entity that now owns the business and equipment ( the lawyer can structure the purchase to avoid, not only the taxes due, but also any other undisclosed debt , liens, etc.

And I agree with the advice to provide for the payment of the unpaid taxes out of the purchase settlement.

Why even buy the name?

Why not just buy the equipment?

The whole deal sounds crazy. Ya gotta pay your taxes and when you are at that point where you don’t you are having red flags right in front of your nose that there is a problem a serious problem. Regardless of her situation this is a business decision.

I would minally seek the advice of an attorney, but if it were me I would run away. There are so many restaurants, equipment, buildings and businesses for sale right now. Everything is on sale and it is a buyers market you can be choosey!!!

We got a place for sale which were selling for originally 199,000 now we are selling for 132,000. There are deals out there…move on and find one.

http://www.facebook.com/?ref=logo#!/pag … 8919292251

Kris

There are a lot of laws in place to avoid abuse of tax debt and it varies by state. I somewhat agree with the other posters who are making points about buying the business vs. equipment. We purchased a business that had a great reputation in the community, but was poorly operated and was loosing a fortune. Is the business you’re looking at failing because it’s operational model are antiquated, or is it that the business model doesn’t fit with the market.

I think, so often, we look at a failed business and label them as “a failure” instead of acknowledging that the market did not support that type of business. That’s been one of the most liberating things I’ve accepted about my store. Does the market want a business model that I’m comfortable with?