Thank goodness it is time to Spring Forward!
Sunday, March 10, 2024
YOU HAVE QUESTIONS, WE HAVE ANSWERS!
VIVA ESCROW Q & A SEGMENT
(Real questions sent to us – verbatim!)
QUESTION:
I sold my coffee shop and the Buyer took over the business. But the escrow refuse to give me my money. What can I do?
ANSWER:
My answer here is based on this business being sold in the State of California.
Unlike the sale of real property, the sale of a business is very different. That is because there are government agencies who have to sign off that all your business taxes have been paid.
In the sale of a business, you and the Buyer decide which day you hand over the business. Example – you hand over the business on March 15. That means your last day of doing business will be March 14. You will gather all the sale tax receipts for this last day and you will be paying all your employees and payroll tax to this day.
Once you have all the figures, you then file and pay your FINAL RETURNS with the California Department of Tax and Fee Administration (CDTFA), the Employment Development Department (EDD) and the Franchise Tax Board (FTB). These agencies will take your final returns and review if they have received all your sales taxes and employer/employee taxes to the closing date. If everything looks good, they will issue a “Release” to the escrow company. The “Release” tells the Buyer that taxes have been paid and Buyer will not be held responsible for any taxes missed. The escrow will then release the money to you.
Please find out from the escrow company if they have received all the Releases. If not, contact which agency has not issued a Release yet and find out what they are missing?
EDUCATIONAL MOMENT:
The escrow company will proactively advise the 3 agencies that the business is being sold and give them information regarding the sale. The agencies will then expect to see that your final returns are filed and taxes paid. If you delay the filing, then they cannot complete their paperwork and will not issue the Releases.
The Financial Code for the Bulk Sale Law requires the escrow company to HOLD THE FULL SALES PRICE intact, without payment of any costs, fees, commission, loans, until the Releases are issued. This can be a huge concern for all the parties involved. It is important that the client asks the escrow in advance how they will handle Seller proceeds at closing.
As an additional comment, it is usual for the CDTFA to audit the past years’ filings of returns when they find out the Seller is selling the business. This will certainly slow the process down as the Seller looks for all his past years’ sales receipts and background information.
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~ Video of the Month ~
I am not a cat person, but I found this one funny!
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~ Quote of the Month ~
“I would not waste my life in friction when it could be turned into momentum”
~ Frances Willard, Educator (1839-1898) ~
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My YouTube Offering for the Month
In conjunction with our Question and Answer of this month:
(please note, this is an educational video so it is 20 minutes long)
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You Have Questions? We Have Answers!
Juliana Tu, CSEO, CEO, CBSS, CEI, SASIP
“Escrow is my FOREMOST language!”
Advance Disclosure:
The opinions expressed in this blog are solely the author’s.
Your comments and viewpoints are always welcome.
Info @ VivaEscrow.com