Business Lawyer Orange County: Does the Bulk Sales Law apply to me?

Written by: Andrew Gale - Orange County - Small Business Attorney

Business Lawyer Orange County, Q#13005: I am a small business owner and have a chance to buy the inventory of another business. What should I think about?

I’m a small business owner. I ran across an opportunity to purchase a small automobile parts business in Orange County, CA. I have the opportunity to purchase all of the parts that are in inventory at a fantastic price. I need to move fast and was wondering if there is anything that I need to be aware of before I jump at the opportunity.

Business Lawyer Orange County, Q#13005: You should think about Fraudulent Transfer Act and another law is known as the California Bulk Sales Law.

Does the Bulk Sale Law apply to me?

Does the Bulk Sale Law apply to me?

In today’s economy, it is not uncommon for people seeking business opportunities to run across opportunities that at first blush would look like a great opportunity to purchase the assets of the business at substantially reduced retail prices. This can be a situation where the buyer must beware of a situation sometimes being too good to be true.

A buyer needs to be aware of the fact that the state of California has laws that protect creditors in the situation where the seller is attempting to transfer able assets of the business without taking care of their obligations to the creditor. One such law is called the Fraudulent Transfer Act. Another law is known as the California Bulk Sales Law.

California Bulk Sales Law

If a buyer and seller failed to comply with the bulk sales law, the failure could result in the buyer being liable for the seller’s debts. Even though the buyer will have the legal right to chase after the seller (in legal mumbo jumbo “seek indemnification”) to try to get reimbursement for the money that was taken by the creditor, many times the seller is long gone with the buyer’s money and the buyer is left holding the bag.

Requirements of the Buyer

Buy Bulk and Save - Small Business Lawyers Orange County Tip

Buy Bulk and Save – Small Business Lawyers Orange County Tip

If the deal triggers the Bulk Sales Law, there are several requirements that are placed upon a buyer including preparing a Notice to Creditors which would be filed with the County Recorder’s Office, then published in a local newspaper of general so Circulation and finally sent to the County Tax Collector’s office.

How should I proceed to protect myself?

If you are considering buying assets in excess of $10,000 from an ongoing business, is strongly recommended that you seek the advice of a business attorney in Orange County specializing in small business to walk you through the process to help you avoid the pitfalls of not complying with state laws.

California Bulk Sale Law – Andrew Gale Orange County Lawyer
 

Make sure that your corporate records accurately reflect the details of the deal.

If you need to talk to a business lawyer about a project such as this, we would be delighted if you would call the IncorporationAttorney at the Law offices of Gale and Vallance (714) 634-4838.


Andrew Gale – Incorporation Attorney

Attorney at Law Offices 1820 West Orangewood Avenue, Suite 104a, Orange, CA 92868 Office: +1 (714) 634-4838. I provide legal advice, counseling and related services to entrepreneurs including the formation and management of their corporations and estate plans.

My Law Office is based in Orange County California and I have practiced law for 30 years. I have given advice to more than 1000 small business owners on the best ways to set up a company, what types of business entities (corporations, limited liability companies, partnerships) are best suited for them and their small business, how to legally run the business to protect their assets and how to successfully transfer the business to family or key employees through the proper use of estate planning and trusts.