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  • Writer's pictureRic Armstrong

Selling a Small Business in Texas - What You Need to Know


When selling a small business in Texas, understanding the state-specific legal landscape is crucial to ensure a successful transaction. While many federal regulations apply to business sales across the United States, Texas has its own set of rules and procedures. Here's a comprehensive look at the legal considerations specific to selling a small business in Texas.


1. Type of Sale and Business Structure in Texas

Texas law provides different types of business structures, such as sole proprietorships, partnerships, corporations, and LLCs. The legal considerations for selling your business may differ depending on the structure.

  • Asset Sale vs. Stock Sale: In Texas, the choice between an asset sale and a stock sale will have different implications for taxes, liability, and how the transaction is structured. Consultation with Texas legal and financial experts is necessary to understand these complexities.

2. Preparation and Due Diligence

  • Texas Business Organization Code Compliance: Ensuring compliance with the Texas Business Organizations Code (BOC) is a must. This includes maintaining up-to-date records and ensuring the proper registration of the business.

  • Environmental Regulations: Texas has specific environmental laws that must be adhered to, especially in industries like manufacturing or energy production.

3. Purchase Agreement and Negotiation

The Purchase Agreement must comply with Texas laws and include certain elements specific to the state:

  • Non-compete Agreements: Texas has specific requirements for non-compete agreements to be enforceable, such as having reasonable limitations on the geographic area and duration.

4. Tax Considerations in Texas

Texas has unique tax considerations that must be accounted for when selling a business:

  • Texas Franchise Tax: The state's franchise tax may apply to certain business entities. Understanding how the franchise tax will apply to the sale of the business is essential.

  • Sales Tax on Business Assets: Texas levies a sales tax on the sale of tangible personal property. Determining whether sales tax applies to the assets being sold requires careful examination.

5. Employee Considerations

  • Texas Workforce Commission: Notification to the TWC regarding the change in employment status may be necessary, depending on the size of the business and the terms of the sale.

  • Texas Payday Law: This law governs how final wages are to be paid to employees in a sale. Compliance is crucial to avoid penalties.

6. Closing the Sale

  • Filing with the Texas Secretary of State: Certain business structures may require filings with the Texas Secretary of State upon the sale of the business.

  • Notification to the Texas Comptroller: The Texas Comptroller's office must be notified of the sale, and any taxes or obligations must be settled.

  • Transfer of Licenses and Permits: Texas requires that specific licenses and permits be transferred or re-applied for by the new owner.

7. Unique Texas Regulatory Considerations

Certain industries have specific regulatory considerations in Texas:

  • Oil and Gas Industry: Texas has specific regulations for the transfer of mineral rights and the sale of businesses within the oil and gas industry.

  • Healthcare Businesses: Selling a healthcare-related business requires compliance with Texas Health and Human Services regulations.

8. Professional Guidance

  • Hiring Texas Legal Counsel: Engaging an attorney well-versed in Texas business law is highly recommended to navigate state-specific regulations and requirements.

Conclusion

Selling a small business in Texas involves understanding and complying with a myriad of state-specific legal considerations. From preparation, due diligence, and negotiation, to tax implications, employee considerations, closing the sale, and industry-specific regulations, the process requires meticulous attention to Texas laws and procedures.


Whether considering the unique aspects of Texas Franchise Tax, compliance with the Texas Business Organizations Code, understanding bulk sales law, or navigating industry-specific regulations, engaging professional legal and financial experts who are well-acquainted with Texas laws is key to a smooth and lawful transaction.


The sale of a small business is a significant milestone, and in Texas, it comes with its own unique set of challenges and opportunities. By recognizing and addressing these state-specific legal considerations, sellers can pave the way for a successful sale that satisfies all parties involved.

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