Successor Liability in Asset Sales of Family or Closely Held Businesses

In creating an estate plan, owners of closely held family enterprises may use asset sales to transfer business assets from one generation to the next. Generally, asset sales allow a purchaser to buy assets without also buying a seller’s liabilities, as would be the case with an equity sale. In the context of family businesses, asset sales could remove the burden of liabilities from other family members. However, structuring a transaction as an asset sale does not eliminate the risk of liabilities passing to family members. The involved parties must give careful consideration to state law doctrines of successor liability and tax statutes to minimize the risk of liabilities accompanying assets in a sale.