Legal Question in Business Law in California

Re: Transfer of Business Ownership

This may be very simple or more difficult, depending on the kind of business involved. Is it a sole proprietorship or a partnership, or a corporation or limited liability company? Is the business a restaurant or a company that sells things (i.e., not a service business?) These questions will determine whether you need a simple document or something more complex.

Feel free to contact me if you'd like to talk about this further.

Re: Transfer of Business Ownership

In a transfer of business ownership between spouses, two areas of the law should be observed: ordinary business and commercial law, and family law.

To address the first: What's required depends upon whether the business is an entity itself such as a corporation or LLC, or merely a proprietorship. If it is a corporation, the merely sells the stock to the buyer. The Articles of Incorporation, bylaws and share certificates themselves should be checked for any restrictions on transferability. Transfer of ownership on an LLC is similar, except the thing being sold is probably not stock; more likely a membership or the membership(s).

In the case of a proprietorship, a bill of sale could be used to transfer the assets; probably there would also be an assumption of liabilities. It may be necessary to comply with the bulk sales law, Commercial Code sections 6101 to 6109 (if memory serves).

Most sales of businesses, whether incorporated or not, are handled by professionals, either lawyers, licensed business brokers, or both. There can be difficult issues involving handling of liabilities to suppliers, lenders and employees, assignment of premises and vehicle or equipment leases, discharge of personal guarantees, valuation of inventory at closing, accuracy of the books, and so on.

The family law issues involve the fiduciary duty of spouses to deal with one another with fairness and complete candor. There is also a requirement that transfers of property between spouses be in writing, clearly expressing the intention of the selling spouse to alter the character (ownership) of the property. The documentation should indicate whether the business was sole or community property (or mixed) prior to sale, and the intended post-sale ownership.

Unless the value of the business (or its exposure to liability) is pretty insignificant, you should have a lawyer prepare the paperwork.