How to Do a Bulk Asset Sale

Video Transcript

"Hi, I'm Robert Nizza with the BTI Group in San Francisco. The topic today is how to do a bulk asset sale. There are typically two ways that we sell businesses. One is a stock sale, and the other one is an asset sale. As the name implies, a bulk sale implies that you're selling the bulk, or most of the assets. And that's done on a special kind of purchase offer sheet. For a bulk sale, the seller of the business will agree to a certain amount of inventory, accounts receivable, accounts payable, work in process, that will transfer with the business. Typically these estimations are settled a day or two before close of escrow, up or down depending on what's there at close of escrow, because we don't really know exactly what the assets are three months before the business sale. So there's a settlement way to do that. One of the real important things with a bulk sale is there's a lot of protection for the buyer. The--if an escrow company is hired, the escrow company typically will do a lien search to make sure that there's no liens on the business assets. The escrow company will also contact the franchise tax board to make sure that the business owner doesn't owe any taxes on the business. And there's also something that's very important that's put in a local newspaper, and it's called a bulk sale notice. It's done in a judicial local newspaper where the business is. And it basically notified the creditors that this business is up for sale, and so that if money is owed to those creditors, they can get paid before transfer of ownership. So, that's the nuts and bolts of the bulk sale."