[Question] Can I sell my business when taxes are still due to SARS?

[mmcd]

Hi guys, any advice would be greatly appreciated.

I am looking to sell my business (CC, not VAT Registered). I currently owe SARS outstanding taxes, interest and penaties. Do I need to settle these before I can sell the business? What are my options?

Thanks.

[HR Solutions]

Why would anyone buy the business with outstanding taxes ?

[dellatjie]

It is normally stipulated in the deed of sale that all liabilities existing prior to the business being sold, remains the responsibility of the seller. I just think it is important to disclose the fact that some taxes are outstanding as well.

[Justloadit]

It is normally stipulated in the deed of sale that all liabilities existing prior to the business being sold, remains the responsibility of the seller. I just think it is important to disclose the fact that some taxes are outstanding as well.

All good and well, but if the previous owner leaves the country, and a debt is raised, then who is liable?
That agreement does nothing for the purchaser, who may be facing a lawsuite.

[BusFact]

@ OP: Yes you can sell your cc/company with tax liabilities still due. There is no equivalent to the clearance certificate required when selling a property for example. The tax liabilities belong to the company (in the normal course of business).

However, no sensible purchaser would buy a business with overdue tax liabilities without a really good reason. SARS may still go after you (the member/director) in your personal capacity for tax arrears due from the time when you were the company representative, if these are not paid by the new owner.

[Andromeda]

Hi MMCD
It depends on what you intend selling, but essentially the answer is yes:
1. You can sell the Members Interest in the close corporation. In such a case the liability remains that of the close corporation. No amount of clauses in the sale agreement will change that. If it is disclosed to the purchaser then it does not present a problem.
2. You can sell the business of the close corporation as a going concern and exclude certain or all liabilities. In such a case anyway, the liability will remain that of the close corporation.

[HR Solutions]

Yes u can but who in their right mind would buy it if it was a large outstanding debt ? If the company was doing well they would have settled it,

[Dave A]

If the company was doing well they would have settled it,

If the company was doing well, it would probably sell at a higher price.

Businesses in trouble can be quite attractively priced, if a person has the skills and resources to turn that company around.

[mmcd]

Hi HR Solutions - the value of the business is more than the taxes due.

[mmcd]

Thanks for all the feedback guys. Could I just stipulate in the sales agreement that the tax liabilities will be paid for with the proceeds of sale?

[Justloadit]

Thanks for all the feedback guys. Could I just stipulate in the sales agreement that the tax liabilities will be paid for with the proceeds of sale?

Under whose action?
There is no guarantee that the seller uses the money for settling the debt, which still leaves the door open on you as the responsible person.

You can opt to pay the taxes, by reducing the value of the sale if the seller is interested.

I would rather purchase the assets of the company, and stock that it has, and the IP. Get the seller to transfer the debtors list to you , and make an agreement, that from the 1st of the following month, you start invoicing and take care of any purchasers from this date forward. All collections and creditors to the end of the month before you start is for the sellers account. In this way you have a clean set of books. Any bad debts or collections are the sellers problems, any outstanding accounts are the sellers problems. You then visit the creditors, and make them aware of the situation, and open new accounts and sureties if required under the new name, trading as old name. Speak to debtors that company name changed and that bank account changed.

Any payment made into your account for previous months, is simply passed onto the seller.

I would get a business broker involved in this deal to ensure that you are covered. There are just too many skeletons hiding in the closet, especially when a company starts struggling to do business.