In this article on the purchase and sale of a Maryland business, I address issues relating to transferring assets during a business sale. For information on other issues and concerns in a business transfer, please see my article, Buying or Selling a Business in Maryland.
When purchasing a business, the buyer must be sure the assets are properly transferred no matter whether the sale is done as an asset sale or as a sale of the entity. As discussed in earlier articles, attorneys will consider many issues when deciding to structure a sale as either an asset sale or a stock sale, including tax and liability issues. When utilizing an asset sale, the transferring documents must reference, whether directly or generally, the assets being purchased. Even if the attorney structures the transaction as a stock sale, the buyer should confirm the purchased company actually owns the desired assets.
All desired assets will need to be documented for an asset sale. A bill of sale can be used to account for most equipment, inventory, and supplies. New deeds must be issued for each transferred real estate parcel. Company vehicles will need to be retitled with Maryland’s Motor Vehicle Administration. If leased equipment is included in the asset sale, then the lease will need to be assigned to the new owner. Real property transfers and leases are discussed in more detail in a separate article.
In addition to these material assets, the buyer should not forget the company’s intellectual property. If the company has client lists, business processes, trade names, trademarks, or patents, then the buyer should specifically address these assets. Careful attention should be given these assets as many state and federal laws govern intellectual property. In some instances, it can be difficult to determine the true owner of the intellectual property. For example, is the company or an employee the real owner of a valuable patent? A review of the employees’ contracts may be necessary.
Assuming the ownership transfer is successful, intellectual property owners must regularly submit notices to regulatory agencies to preserve their rights. The time of sale would be a proper occasion to investigate upcoming trademark filing deadlines.
For further information, please contact Jeff Rogyom at (410)929-4578.