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I have a C-Corporation. Because of vendor relationships, would it make more sense to sell the corporate entity

I have a C-Corporation in Texas and plan to sell to someone out of state. The Brand name of the product is certainly going to stay with the product. The corporation has vendor numbers with a number of retailers who we actively sell to.

I would like to sell the assets to a new corporation the buyer creates and dissolve the current corporation. In this case, I imagine the buyer's new corporation would have to work with the vendors to change or get a new vendor number.

Because of the vendor relationships, would it make more sense to sell the existing corporation entity instead of the assets? The corporation does not have any real debt or other problems. Is that even an option with a person in a different state? How does that work with the few people that have been issued stock in my C-corp?

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Answers (3)
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The BAF Group LLC
MD

I do not know about the UPC code question. But as for the name, that is one of the things they would purchase, in an Asset Sale. To change things over, they would form a new company, doing business as whatever your Company name is. That way, they continue to operate under your Company name, but legally the corporate umbrella is unique to them.

I am uncertain what you mean about asking your "customers a generic question", but I would say nothing to anyone about the sale, in advance - if I understand the intent of that statement. There is nothing to ask them that would do anything but alarm them, until you have a specific Buyer in hand.

Oct 1, 2013
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Thanks for the response, Don. I will be getting with my attorney and my accountant, I am just trying to understand in advance.

There are certainly agreements with the major customers, but changing may not be a big deal. Again, I am trying to understand before I even ask my customers a generic question. If there is no TAX ID involved, maybe it is just a change of address...

What about things like UCC membership/UPC codes, liability insurance, and many other things I am not thinking of .. If they do acquire the corporate entity, would all of that just automatically continue with little more than a notice of change of address?

I guess it is possible to transfer the UPC code to a different corporation. Do you know about that?

Could they create a corporation with the same name in a different state if my corporation does not object? Then they could acquire the entity and either keep it or dissolve it once they had the "mail forwarded" and all of the everything transferred..

Sep 30, 2013
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The BAF Group LLC
MD

The vast, vast majority of Buyers' Attorneys will counsel against buying the C-Corp, and push their Clients to go forward only with an Asset Sale. Even if you know of no liabilities, there are chances that one or more may be lurking without your knowledge. That is what the Attorneys will fear - and sometimes, their fears are borne out!

Whether it is worthwhile with respect to your vendor relationships, the major question is whether there are specific contracts involved, that cement those relationships. If there are none, whether you sell the Assets or the Corporation may not matter. But if there are, frequently those contracts will specify that if there is a change in the majority stock ownership, all parties have to be notified. That might adversely affect your contract, right then and there.

Sometimes, if selling the Corporation is the right thing to do, an escrow can be established to cover foreseeable (or even unforeseeable) liabilities. This may or may not work, and it may or may not be acceptable to the Buyer and his/her Attorney.

But regardless, it is always the Buyer's option to determine what - if anything - he/she will or will not buy. I would take a careful look at the pros and cons, talking it over with your own Broker and (more appropriately) with your Attorney, so that you are armed with options from your perspective. Then be flexible with the prospective Buyer so that you can speak in qualified terms to him/her, as you go through the process.

Sep 28, 2013

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