Why You Should Conduct a UCC Lien Search Before Buying a Business

As the buyer in a transaction you will have a long list of items to request from the seller during due diligence. One area of particular importance has to deal with the seller’s assets and any liens against those assets. Even when a transaction is structured as an asset sale, any liens on the seller’s assets will become your problem. What is a Lien? A lien is a legal right or interest that a creditor has in another individual or entity’s property. For buyers, this means that if you purchase assets that have a lien against them, someone else has an interest in your newly acquired property. This other party may be a creditor and that could spell trouble if the lien is still intact once the deal is closed. It is possible to include language in the purchase agreement that will protect you. However, I recommend conducting thorough due diligence on your target as your first line of defense. Thankfully, searching public records can clue you in as to any liens. Types…

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