If you are buying a business in New Hampshire, you will want to obtain tax clearance from the state to make sure you are not taking on the seller’s outstanding tax liability. Buyers often assume that if they acquire a business through an asset purchase as opposed to a stock sale then they will not be responsible for any of the seller’s unpaid taxes. However, most states have successor liability rules that allow the transfer of certain tax liability to the buyer even in an asset purchase. Often this type of successor liability is limited to sales and use tax and other excise taxes that a seller collects on behalf of the state.
Obtaining a tax clearance letter from the state is important assurance for a buyer in an asset or a stock purchase that they are not taking on unpaid tax liabilities of the seller. In addition to obtaining tax clearance from the state, a buyer of a New Hampshire business also should check state UCC records to make sure the business’s assets are not encumbered by any liens.
A tax clearance letter (known in New Hampshire as a statement of good standing) is evidence that all of a business’s state taxes are paid in full. Statements of good standing are issued by the New Hampshire Department of Revenue Administration (DRA). Requests must be made by a current officer or owner of the business. That means that if you’re trying to buy a business, you’ll need the cooperation of the current owners to get a letter. Use Form AU-22, Certification Request Form. The same form is used to request multiple types of certificates; be sure to check the box for a statement of good standing. For more information, check the DRA website.
If you want a detailed review by a federal court of the ways in which a buyer can be held liable for a business’s liabilities, consider reading the New Hampshire case Kleen Laundry v. Total Waste Mgmt. Corp., 817 F.Supp. 225 (D.N.H. 1993).
If you are buying a New Hampshire business, you’ll also want to make sure the assets you are acquiring are not subject to any liens. You can do this by checking the state’s public records for creditor financing statements. This gives you notice of what secured debt you’ll be acquiring (if any) related to the business’s equipment, inventory, and possibly other items. You will want to do this whether you are buying the business in an asset or stock purchase.
You can do a UCC search on the New Hampshire Secretary of State website. New Hampshire requires you to create an online account before you can run a search. In addition, you must pay for online searches.
If you are buying a business, there are other possible kinds of business debt not covered here that you might want to investigate, particularly in a stock acquisition. This could include, for example, unpaid local taxes, guarantees, or other private contractual obligations.
For all the essential information about buying or selling a business, get The Complete Guide to Buying a Business (Nolo) and The Complete Guide to Selling a Business (Nolo), both by Fred S. Steingold.